2014 trends for homebuyers: steeper mortgages, fewer refis

A number of opposing forces are likely to keep homebuying steady in the year ahead, as mortgage rates continue to rise and adjustable-rate mortgages return to the stage.

Mortgage rates are likely to increase even further in 2014 as the Federal Reserve reduces its monetary stimulus, and rising employment and incomes increase buyers’ purchasing power.

Fewer borrowers will be looking to refinance high-priced mortgages as rates increase, which will spur lenders to more aggressively compete for business — benefiting those looking to borrow. Minimum credit score requirements, loan-to-value ratios and debt-to-income rations will therefore loosen up, Erin Lantz, director of mortgages at Zillow, told the New York Times.

Adjustable-rate mortgages are also likely to make a comeback, as their appeal reemerges in the face of rising rates on fixed-rate mortgages.

Perhaps surprisingly, home ownership rates will actually tumble in the next year, Bob Walters, chief economist of Quicken Loans, told the Times, because the rate is only just beginning to steady after hitting a high during the housing bubble and tumbling after the recession.

“I don’t see us going up substantially from here,” Walters told the Times. “We’re likely to level off where we’re at now.” [NYT] — Julie Strickland