Mortgage standard rate rises for the first time since the Great Recession led by flood-affected areas in Midwest
- New report examines US standard rates in the second quarter of 2019
- The default values rose for the first time since 2009 and corrected for the 2017 hurricane season
- Nebraska affected by flooding experienced the largest increase of 26% on an annual basis
- Florida experienced a surprising decline with a fall of 11% on an annual basis
- A decrease in the number of overdue payments in July indicates that the peak is probably a fluke
According to a new report, the standard mortgage rate in the US has risen for the first time since the financial crisis.
In the second quarter of 2019, the national standard percentage increased by 3% compared to the same quarter last year, the first such increase in a decade after excluding the impact of the hurricane season 2017, according to Black Knight Mortgage Monitor.
However, experts warn that the peak in defaults does not necessarily give rise to panic, with reference to possible weather-related effects and a subsequent fall in the number of overdue claims in July.
For the quarter ending June 31, Nebraska experienced the largest increase in defaults, by 26% on an annual basis, followed by South Dakota with 18% and Montana with 15%.
This graph shows the percentage change in standard rates compared to the same period the year before. The 3% increase in the second quarter is the first increase since 2009, excluding hurricanes 2017
This graph shows the number of default settings for the first collateral in each quarter. The peak in the fourth quarter of 2017 is due to hurricanes and is excluded from the first graph
All three states were hit hard by floods along the Missouri and Mississippi earlier this year – the study authors thought the impact on default values extended to flood areas.
In total, 39 different states saw the standard rate for the quarter rise, but a few notable exceptions remained apparent.
Florida's default rate decreased by 11% on an annual basis, probably partly due to continued recovery from Hurricane Irma 2017.
California also saw a 2% decrease in default values, possibly partly a revival of the 2017 natural fire season, which was the most destructive at the time.
The study noted that there was a clear distinction between standard percentages on a geographic basis, with the highest seen in the southern US and the lowest in the north and west.
Flooding is seen near Ashland, Nebraska in March. Nebraska led the nation to raise the default rate in the second quarter, with rates rising 26% on an annual basis
The map shows the first default values of each state as a percentage of all mortgages for the second quarter
The study noted that mortgages from government-sponsored companies such as Fannie Mae and Freddie Mac have increased by 3%, even though they still have a standard rate that is around half the market average.
FHA and VA loans increased by 5% and have a standard rate of around twice the market average, the report said.
The authors of the report note that the fact that the quarter ended on a Sunday may have contributed to the increase in the number of defaults.
Black Knight has also released preliminary data July suggests that the peak in the second quarter was a fluke.
The national delinquency rate decreased by 7% in July, which compensated for most of the peak in June.
At 3.46%, the default rate from July 2019 was the lowest of all records in July, dating from 2000.
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