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Mortgage Outlook Forecasts Next Year’s Performance

12.18.2019

Today’s release of Fitch Ratings’ Global Housing and Mortgage Outlook for 2020 offers an if not overwhelmingly optimistic forecast for both Canadian and American mortgages, at least an assurance that mortgage performance will maintain a stable stasis in the coming year. 

The reasons given for this stability in the 2020 mortgage game is thanks to the supporting players of strong employment, a healthy predicted income growth and low interest rates. Further good news, according to Fitch Ratings’ findings, is that although economic slow downs in the US may have a mild sedative-like effect on home price growth, there does not seem to be any indication that such a slow down will drastically affect residential mortgage-backed securities metrics.

The report then addresses the issue of arrears, predicting that US arrears of three months or more will increase, yet hover only around 1.5% throughout this coming year and 2021. The report also contributes this stability to the support of the same players of a strong labor market, income growth, and low interest rates.

As for US home price growth, the forecast called for it to reach an increase of 3% thanks to the factors of positive job growth, a high household savings ratio, and low mortgage rates that are checked by a sluggish GDP growth, lowering home prices in wealthier markets, as well as limits in affordability. The report also points to tax changes from 2018 possibly being the culprit having affected areas with higher property values and higher tax rates.

The report also wagers that the government will take a step back and have less of a hand in US mortgage markets, leaving more mortgage funding by the private sector. As a result, it would stand to wager that home loans would rise in cost  in light of the higher cost of capital for the private sector.

Regarding American mortgage lending, the report projects that it will decrease by nearly 5% over the next two years, a direct result they contribute to slowing refinancing activity. It is also predicted  that non-qualified mortgage lending will increase due to lenders and investors becoming more flexible about dealing with loans that do not meet GSE standards.

by Andy Beth Miller (via www.themreport.com)

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