Is Family Mortgage Debt Out of Control?

Don’t worry that we are heading back to the spending crisis of the 2009 era!  Our mortgage debt per family is much lower than it was before the big crash.  In fact the ratio of mortgage debt service to income has not been this low since 1980.  With low interest rates and our buyers market here in Southwest Florida you may be able to afford an home of higher value than you imagined.  Call me today so we can work with my team of mortgage experts and get you qualified for a new mortgage.  Then we can find you the house of your dreams!


Courtesy of Keeping Current Matters 2018

Is Family Mortgage Debt Out of Control? | MyKCM

Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time.

These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago.

Today, we want to assure everyone that this is not the case. Here is a graph created from data released by the Federal Reserve Board which shows the Household Debt Service Ratio for mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage.

Is Family Mortgage Debt Out of Control? | MyKCM

Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%).

Bill McBride of Calculated Risk recently commented on the ratio:

“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”

Bottom Line

Many families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.

Remember it is always toasty in Naples and you deserve your piece of Naples sunshine and to be paying your mortgage not your landlords!

Comments are closed.