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
Apartment REITs that own Class B and C properties and those in gateway cities will see net income fall through 2021 (iStock)

Urban flight, job losses will hurt apartment REITs: Report

Urban flight, job losses will hurt apartment REITs: Report
(iStock)

Older Americans increasingly saddled with housing debt

Older Americans increasingly saddled with housing debt
The number of single-family homes on the market hit historic lows in July, driving prices up (iStock)

US housing supply reaches nearly 40-year low

US housing supply reaches nearly 40-year low
The rates for a 30-year fixed-rate mortgage dropped 7 percentage points for the week ending September 10, reaching 2.86 percent. (iStock)

Mortgage rates notch new low

Mortgage rates notch new low
(iStock)

Remote work threatens cash flows for office REITs

Remote work threatens cash flows for office REITs
Since the pandemic started, there is a much smaller pool of lenders willing to offer jumbo loans (iStock)

Mumbo jumbo: Why are mortgage rates all over the place?

Mumbo jumbo: Why are mortgage rates all over the place?
Federal Reserve Chairman Jerome Powell (Getty, iStock)

Real estate stocks outperform broader market but still sink

Real estate stocks outperform broader market but still sink
Federal Reserve Chairman Jerome Powell (Photo by Sarah Silbiger/Getty Images)

Fed “not in any hurry” to raise interest rates: Powell

Fed “not in any hurry” to raise interest rates: Powell
arrow_forward_ios

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

Loading...