Friday, August 8, 2014

Change is a coming: Good news for credit, uncertainty for home sales

Strap in for the market ride


Just like the IRS tax man chasing after you, constant market fluctuation is a natural part of life. For every down period there will follow a corresponding up, and so on and so forth.

For about three decades, homeowners enjoyed a roller coaster drop on mortgage rates that seemed like it would never stop falling. Peaking at a whopping 18 percent in the early 1980s, interest rates plummeted to less than 3.5 percent in 2013 before finally hitting rock bottom. Next came the inevitable (but scary) transition into rates moving the other direction.

Fortunately, so far the climb has been minimal, more like hiking up the block rather than hiking a Colorado 14'er. Rates are currently rivaling levels in the low 4 percent range similar to this time last year - still a steal from a historical perspective. However, the change has caused broader implications on the market in terms of housing turnover. Homeowners locked into ultra-low mortgage rates have less incentive to sell, creating a tight market and even higher prices.

As long as various economic factors prevent new buyers from being able to bid into the market, though, interest rates will have to stay low to maintain balance. Along those lines, potential borrowers suffering from the tightened lending standards of the past few years may get some relief with changes to how credit scores are calculated.

FICO to lessen impact of medical bills on credit


According to reports this week, the Consumer Financial Protection Bureau - which dictates rules the mortgage industry must follow - has decided to lessen the hit medical debt takes on credit scores. This is welcome news for anyone who has dealt with unexpected medical expenses not covered by insurance, improving your ability to get the best rates available.

The market is eternally responding to and compensating for changes, and if you can expect anything, it's for a different story each month. Stay tuned to see how the industry keeps evolving in the months ahead.

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