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Rate Growth Shifts as Delinquencies Drop

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borrower outreachServicers are likely to see monthly mortgage payments rise at a slower rate in 2019, according to the latest data from CoreLogic. While the median home sale price rose about 4 percent year over year in January 2019, the principal-and-interest mortgage payment on that median-priced home increased almost 11 percent because mortgage rates rose by half a percentage point over that period. Despite the increase, rates continued to ease after January this year and some mortgage rate and home price forecasts suggest payments will rise at a much slower pace through the rest of the year.

CoreLogic’s Home Price Index Forecast predicts a 5.2 percent annual gain in home prices by January next year, and homebuyers are expected to lose less purchasing power this year compared with 2018, as long as forecasts for prices, rates and income hold.

The typical mortgage payment has trended higher in recent years, but CoreLogic notes that as of January 2019, the typical payment is still 32.5 percent below the all-time peak of $1,275 in June 2006, when the average mortgage rate back in June 2006 was about 6.7 percent, compared to 4.5 percent in January 2019.

The typical mortgage payment is expected to rise from $861 in January 2019 to $889 by January 2020, a 3.3 percent year-over-year gain, a much slower growth rate than the 8.8 percent gain a year earlier. CoreLogic states that in nominal terms, the typical mortgage payment’s year over year increase in January 2020 would be 5.9 percent, or just over half of the 10.5 percent gain a year earlier.

While mortgage rates have been slowing, delinquencies have been declining as well. According to the latest Loan Performance Insights Report [1] from CoreLogic, mortgage delinquencies fell by 0.9% year over year in March. Frank Nothaft, CoreLogic Chief Economist cites recent employment increases as one reason for the improved loan performance.

"Income growth, home appreciation and sound underwriting combined have pushed delinquency rates to their lowest level in 20 years,” said Nothaft. “The low delinquency rates on home mortgages are a contrast to the rising delinquency rates on consumer credit. While home mortgage delinquency rates are at, or are near, their lowest levels in two decades, delinquency rates for auto and student loans are higher now than they were during the early and mid-2000s."