Will 2009 See an Increase in Mortgage Loans?

2008 was not a good one for most homeowners in this country. Many who work in the real estate market are hopeful that 2009 will bring an upswing in their battered sector of the economy. They feel that potential home buyers will be encouraged to take on mortgage loans with the new low interest rates and help reduce the current glut of home inventory. Most financial analysts see it differently, however. They foresee a deepening of the economic recession and a continued downturn in home values. Consumers in some markets might take the opportunity to grab the current low rates offered on mortgage loans. The excess of inventory exacerbated by increasing foreclosures, however, will likely keep the housing market down. In addition, there are a slew of adjustable rate mortgage loans that are set to readjust in the coming year. Many predict that will contribute to the already overburdened inventory of homes. Some consumers who would like to buy right now are finding that they are not eligible for mortgage loans like they once were. Lending standards have tightened significantly, which will exclude many buyers who would have qualified for mortgage loans a year or two ago.
Current homeowners wonder if it is time to refinance their current mortgage loans under the new low interest rates. Applications for mortgage loans hit the highest level in five years last week. About 80 percent of those applications were for refinancing. But many of those applicants were not approved. One mortgage lender in South Florida said that only about 5 of the 50 customers who called about refinancing recently qualified. Many markets across the country have homeowners who now have larger mortgage loans than the values of their properties, due to the drop in home values. The more restrictive lending practices are leaving these mortgage loan holders out in the cold. Lenders are requiring a higher percentage of equity in the home, a high credit score and a low debt to income ratio. This is in stark contrast to the lending standards for mortgage loans of just a few years ago.
A lot of financial analysts warned years ago that lax lending practices would lead to trouble. Those standards often required little or no down payments for mortgage loans and appeared to disregard the credit worthiness of many applicants. Although the new lending standards may be compounding the already suffering real estate market, they will offer a necessary correction for a credit market that appeared to be out of control. We will have to wait and see if the new year will offer a renewed confidence in the credit market, and ample encouragement for consumers to take on new mortgage loans to get the ailing real estate market going again.