Higher Rates Spell More Mortgage Defaults

With home value increases slowing, consumers’ ability to tap home equity loans to pay off more expensive credit card and other debt is waning. “Consumer[s] can’t keep looking at their houses to bail them out of consumer debt,” he said

The impact of rising interest rates will be felt most directly at the low-end of the mortgage market, resulting in rising defaults in the sub-prime category, says Ron Chicaferro, executive vice president of Thornburg Mortgage In., a Santa Fe, N.M.-based real estate investment trust.

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