Americans Getting Bigger and Bigger Mortgages

Americans Getting Bigger and Bigger Mortgages

( – Last year’s anti-COVID lockdowns put the housing market in suspended animation for months. Now it’s back with a vengeance – but demand is beating out supply, and that could be fueling a new debt crisis.

The last year has shaken up the world of real estate, with low-interest rates and the surge in home working stoking up demand for housing at the same time as COVID made it harder to sell. The result, according to a CNBC report from May 19, has been the fastest growth in property values for more than 15 years, and that’s forcing buyers to take out bigger mortgages.

Last week, the average interest rate for a 30-year fixed-rate mortgage increased from 3.11% to 3.15% – which makes a big difference when you’re repaying the $411,400 cost of an average home.

There are two serious risks in play with rising borrowing costs on top of a surge in prices. One is that the cost of a loan could deter many people from buying at all, and there are already signs of that happening – mortgage applications are still coming in, but a growing share is for refinancing. Worse, if Americans take on too much mortgage debt, any rise in interest rates could start us back down the same road that led to the 2008 financial crisis.

Another factor that reports suggest might be impacting the housing market is tax-free stimulus payments. The average family of four received $11,400 in stimulus money since April of last year. If both wage earners continued to be employed during that time, they could have a significant chunk of cash to help make the downpayment on a house or to take on a larger mortgage.

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