Rising interest rates could force shift towards riskier mortgages

New York /
Apr.April 14, 2011 09:31 AM

With interest rates poised to rise, lenders and investors in the nation’s $6.8 trillion mortgage-backed securities market will be exposed to significantly more risk, according to a new report from Fitch Ratings. The agency said yesterday that rates are likely to rise over the next several years as a result of record levels of U.S. debt and the beginnings of an upswing in 10-year Treasury yields. For investors in MBS, that means “heightened price volatility, particularly [for] those that are highly leveraged, fund through repo markets, or mark-to-market their holdings,” Fitch said. In addition, fewer Americans would be able to afford homes, leading to a proliferation of floating rate and hybrid adjustable-rate mortgages and a shift away from the popular 30-year fixed-rate mortgage. In effect, Fitch said, this would “transfer interest rate risk from lenders to borrowers, running contrary to the current public policy focus on mortgage product simplicity and consumer protection.” TRD


Related Articles

arrow_forward_ios
JDS Development Group’s Michael Stern and 111 West 57th Street; Fortis Property Group’s Jonathan Landau and Olympia Dumbo (Olympia Dumbo, 111 West 57, Fortis Property Group, iStock)
Rising rates slow new development sales in Brooklyn, Queens
Rising rates slow new development sales in Brooklyn, Queens
555 Edgecombe Avenue and Efrem Harkham (LoopNet, Getty, iStock)
Harkham family buys historic Washington Heights apartments
Harkham family buys historic Washington Heights apartments
Federal Reserve chair Jerome Powell (Getty/Illustration by Kevin Rebong for The Real Deal)
Fed hikes interest rates as inflation concern simmers
Fed hikes interest rates as inflation concern simmers
(iStock)
Germany tightens mortgage lending to reel in soaring housing prices
Germany tightens mortgage lending to reel in soaring housing prices
Home flips are at their lowest since 2003 while big money is pouring in from investors looking for fixer-uppers. (iStock)
Investors gobble up fixer-uppers despite scarce inventory
Investors gobble up fixer-uppers despite scarce inventory
(iStock/Illustration by Kevin Rebong for The Real Deal)
Investors pile into house-flipping
Investors pile into house-flipping
Housing supply is tighter than ever. (Getty)
Active home listings hit record low
Active home listings hit record low
The mirage of low interest rates
The mirage of low interest rates
The mirage of low interest rates
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...