Home mortgage debt surged to a new high in the second quarter, leaving the pre-recession 2008 peak in the dust.
The total mortgage balance grew during the second quarter by $162 billion to $9.406 trillion, according to the Federal Reserve Bank of New York, the Wall Street Journal reported on Tuesday. That’s more than the 2008 record of $9.294 trillion.
Mortgage debt has been climbing since 2013, when it fell by 15 percent in the wake of the recession. Continuing 20 straight quarters of increase, total household debt also grew by 1.4 percent to $13.9 trillion. But today’s context is markedly different from 2008: lending standards aren’t as loose as they were leading up to the recession and debt is not as delinquent.
But the housing market has been strained by low inventory and high prices, while homeowners are increasingly dipping into home equity to refinance. According to mortgage-finance company Freddie Mac, borrowers took out $17.5 billion in equity from their homes during the second quarter of the year, a $2.1 billion increase from the same time last year. Still, it’s much less than the 2006 peak of $84 billion cashed out in just the second quarter of 2016.
Refinancing made up one half of new mortgages in the second quarter, which industry researcher Guy Cecala called a “mini refinancing boom,” compared to just 30 percent of mortgages from refinancing in 2008. Contributing to the boom was a dramatic drop in the 30-year mortgage rate, now below 4 percent, incentivizing borrowers to take out mortgages or refinance. [WSJ] — Georgia Kromrei
Original Content The Real Deal