The healing U.S. mortgage market should be back to full health by the end of next year, according to a new forecast from credit data and reporting firm TransUnion.
The TransUnion 2016 forecast calls for the serious delinquency rate – mortgages past due by 60 days or more – will fall to 2.06 by the end of 2016, into the range of a “normal” market. The rate is expected to fall to 2.5 percent at the end of 2015, down from 3.29 percent in 2014. The delinquency rate peaked at 6.94 percent in 2010 during the midst of the Great Recession and the height of the foreclosure crisis. Since then, the rate has made a steady decline back to traditional levels.
“We have observed that a ‘normal’ delinquency rate falls between 1.5% and 2% in the past, and our forecast puts the nation back at this level,” said Steve Chaouki, executive vice president and head of TransUnion’s financial services business unit. “Newer vintage mortgage loans have been performing at this level for the last few years, but a combination of factors such as the funneling of bad mortgage loans through the foreclosure process, an improvement in the employment picture and an uptick in housing prices were needed to get back to normal.”
Homebuyers will also take out higher mortgage loans next year, according to the TransUnion forecast. The average mortgage debt per borrower is projected to rise to $189,917 by the end of 2015 and $192,512 by the conclusion of 2016. That will be a $9,000 increase from the recession low of $183,339 at the end of 2012. “This is a clear indicator that housing prices are recovering and consumers are gaining access to more mortgage loans,” said Chaouki.
Another indication that the mortgage market is on track for full recovery is the anticipated Federal Reserve interest rate hike next week. The Fed has been waiting for the market to show enough signs of strength before it raises its target rate from its current level around zero. The rate has rested there for the past seven years and the fact that the Fed plans to raise it this month is a testimony to the rebounded health of the mortgage market.