Mortgage

U.S. mortgage debt hits a record $15.8 trillion

Low financing costs are boosting mortgage demand

Outstanding U.S. mortgage debt rose to $15.8 trillion in the third quarter of 2019, according to the Federal Reserve.

Combined home, farm, multifamily and commercial mortgage debt increased 1.2% from the prior period, the largest quarter-to-quarter gain in almost two years.

The biggest chunk of debt was held on homes, at $11.1 trillion, followed by commercial, with $3 trillion of loans, multifamily at $1.6 trillion and farms at $254.1 billion, according to the Fed data.

Mortgage debt is rising as U.S. real estate values gain. The value of all U.S. owner-occupied homes increased to a record $29.2 trillion in the third quarter, 21% higher than the bubble peak reached in 2006, according to the Fed.

Low mortgage rates boost real estate prices, and hence the volume of loans, because cheaper financing means buyers qualify for higher-balance mortgages and can bid more for properties they want.

Home loan rates tumbled through most of 2019 as the American economy showed signs of softening and investors worried about the fallout from trade wars. The average U.S. rate for a 30-year fixed conventional mortgage was 3.64% this week, the lowest in three months, according to Freddie Mac.

Mortgage rates may set new lows, another boost to the housing market, Fannie Mae said in a Dec. 23 forecast. The average fixed rate probably will be 3.6% in 2020, which would be the lowest annual average ever recorded in Freddie Mac records going back to 1973.

That compares with 3.9% in 2019 and 4.5% in 2018, according to Fannie Mae. The current record was set in 2016 when the annual average fell to 3.65%.

Recent turmoil in the Middle East, which escalated after a U.S. drone killed a top Iranian general, caused mortgage rates to fall this week, said Sam Khater, Freddie Mac’s chief economist.

“Mortgage rates fell to the lowest level in thirteen weeks, as investors sought the quality and safety of the U.S. Treasury fixed income markets,” Khater said. “The drop in mortgage rates, combined with the strong labor market, should propel a continued rise in homebuyer demand.”

Latest Articles

Fannie and Freddie CEOs talk 2021 challenges, controversial 50 bps refi fee

Freddie Mac’s David Brickman and Fannie Mae’s Hugh Frater also offered their takes on challenges with affordable housing, racial disparities with homeownership, expectations for 2021 and – yes, you knew it was coming – the 50 bps adverse market fee that’s due to hit lenders doing refis beginning in December.

Oct 20, 2020 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please