Mortgage Debt Rises To $15.8 Trillion, And May Rise Further With Lowest Rates Since 1973
11 Jan 2020
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- Current outstanding mortgage debt, as of Q3 2019, stood at $15.8 trillion.
- Mortgage debt will likely increase further due to lower rates leading to increased demand for real estate.
- The average mortgage rate for 2020 is estimated to be 3.6%, the lowest since 1973.
Data released by the Federal Reserve revealed that the total value of mortgage debt in the US stood at $15.8 trillion by the end of the third quarter of 2019. This includes all debt taken out for homes, multifamily and commercial properties, and also farms, and is an increase of 1.2% over the previous quarter.
The debt that has been taken out to finance homes made up the majority of this outstanding mortgage balance, totaling approximately $11.1 trillion. Commercial properties owed a collective $3 trillion, while multifamily properties and farms owed $1.6 trillion and $254.1 billion, respectively.
A major driving force behind the ever-increasing mortgage debt in the country is the rise in the value of the real estate. In total, US homeowners hold houses with a collective worth of around $29.2 trillion as of Q3, 2019, which is 21% above the figure reported in 2006 when the housing bubble was at its highest point.
Also, mortgage rates have also remained attractive, which, in turn, have led to an increase in real estate demand and, thus, an increase in property prices. In 2019, mortgage rates for houses remained low, and reached its lowest point in three months in the month of January, reporting 3.64% as the fixed 30-year rate for a conventional mortgage during the first week of this year, as per Freddie Mac.
According to Fannie Mae estimates, mortgage rates would likely continue to remain at the lower end during 2020 as well, staying at an average of 3.6%, the lowest since 1973. This may give yet another boom to the real estate market and potentially drive up prices even further.
This would be an exceptionally low rate in the recent couple of years as well, considering that the average rates in 2019 and 2018 were 3.9% and 4.5%, respectively. In 2016, the average rate was 3.65%, slightly higher compared to current estimates for 2020.
This recent fall in mortgage rates has been linked to the rising tensions between the US and Iran. Although the situation has stabilized, for now, investors are still going to prefer fixed income markets to invest, potentially bringing down mortgage rates even further.