Rising Interest Rates Cause Surge in Foreclosures

The nationwide housing boom has caused a surge in mortgage rates, which is causing trouble for home owners with adjustable rate mortgages. Adjustable rate mortgages account for approximately twenty five percent of all current mortgages, and therefore this is a problem that has the ability to significant impact the housing and mortgage industries.

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The fluctuations of the mortgage rates caused by the booming and cooling of the housing market has caused a great deal of trouble for home buyers who may have signed up for more than they could afford. Adjustable rate mortgages are popular as they can allow a home buyer to purchase a more expensive home than they could finance on a fixed rate mortgage. This seems like an advantage at first, but it is coming back to haunt home buyers as mortgage rates jump in the booming housing market and their monthly mortgage payments are no longer able to be met. The number of Americans who can no longer make their mortgage payments is on the rise, according to recent data from RealtyTrac, a company that tracks housing trends nationwide. RealtyTrac reports that there have been 323,102 mortgage defaults this year between the months of January and March. When compared with the 188,122 defaults which occurred during the same period last year, the increase is significant. With mortgage defaults up 72% from last year, industry experts are worried about the effect that this will have on the housing market and economy in general.

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RealtyTrac lists the four cities that lead the country in foreclosures as Indianapolis, Atlanta, Dallas and then Memphis, in that order. Indianapolis has a troubling one in every sixty nine homes in foreclosure, Atlanta is only marginally better with one in seventy homes in foreclosure. Dallas and Memphis are slightly better off at one in every ninety nine and one in every one hundred and five homes in foreclosure, respectively. There is some heated debate about whether this trend will get better before it gets worse.

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Currently, the debate centers on speculation about the job market and if inflation can be reigned in. If the job market is slow and inflation continues, then the mortgage default and foreclosure rates are almost guaranteed to continue to grow. However, the housing market is currently cooling, and if it continues to do so while the job market remains healthy or hopefully improves, then there are fair odds that we are likely to see the numbers of foreclosure and default lessening.

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