Donald Trump's campaign for president on Wednesday proposed raising the interest rates on some home loans to as much as 15 percent.The Trump Mortgage Bank, a subsidiary of his campaign, is the first big mortgage lender to go ahead with such a plan.The move comes after Trump, who has proposed closing the so-called revolving door between Wall Street and the White House, said in a recent interview th...
The Federal Housing Finance Agency’s latest mortgage rates report on Wednesday showed that homeownership is on the rise in the United States, with an average price of $102,400, up more than 13% from a year ago.
The housing sector is a key driver of the economy and is expected to provide the nation’s largest jobs increase in nearly 20 years, according to the report.
While the economy has been buoyed by a housing recovery, the Federal Reserve is now pushing to boost the housing supply and increase the number of loans for homebuyers.
“The housing market is still recovering and is now a very, very good opportunity for a lot of people,” Fed Chair Janet Yellen said at the National Association of Realtors conference in Washington on Wednesday.
Homeownership is also seen as an asset, meaning it can be used to invest in property, such as a home or a business.
Home prices in the US are on the rebound, and investors have begun to take note, said Jim Pugh, an economist with TD Securities in New York.
“Investors are looking at these properties and asking: Is it worth it?” he said.
The number of mortgages issued by banks has been growing for years, and interest rates are at record lows.
“I don’t think you can say it’s a bubble,” said Michael P. O’Neill, chief investment officer of First Trust Capital Management in New Jersey.
“There’s just too much uncertainty around these loans.”
The rate increases are a signal that the housing market could be picking up speed.
Mortgage rates have been at historically low levels for years and the trend is expected continue, said John Halt, an analyst with Bankrate.com.
But the pace of rising prices is not enough to spur investors to buy homes.
“If the housing bubble bursts, we will have seen a crash in house prices,” said Halt.
“People will be paying a lot more for homes, but there’s no way that the bubble will burst.
People are taking the time to look for a place, but it’s not a quick process.”
A major factor driving up home prices is the Federal Housing Administration’s new loan rate rules, which began in December and apply to mortgage loans in all 50 states.
Under the rules, the monthly mortgage payment for a new mortgage must be no more than 25% of the mortgage’s value.
That is far less than the 25% rate banks had to pay in 2008.
In addition, banks must offer mortgages with more than $1 million in down payments.
The new rules will take effect on July 1, and the agency is expecting to have more than 200 million homeowners in default on their mortgages by 2019.
Homebuyers are still finding ways to save money.
In February, Wells Fargo said it would stop selling mortgages in states that did not allow it to do so, including California, Illinois and Florida.
It also said it will start charging interest on the first $5,000 down payment for new mortgages, which was the case in California and Illinois.
Home sales are expected to surge in 2017, with the stock market buoying and the Federal Deposit Insurance Corp. expecting more than 7 million new loans to be issued in 2017.
The stock market has risen sharply this year, rising from around $36.80 in early May to more than a $50.80 high this week.
But investors remain skeptical that prices will pick up anytime soon.
“We’re not seeing any real signs of price appreciation,” said Charles T. McMahon, an investment strategist with BlackRock in New Brunswick, New Jersey, who expects the price of a home to rise only to about $70,000 in 2019.
“It’s been way oversold.”