Do my eyes deceive me? Is America slowly climbing out of the debt cycle that has come close to choking it in recent years. (ed. For everyone but the government it has…) The American consumer is shying away from home equity loans and cash out refinancing on their mortgages and are now bringing money to the table when they are refinancing their mortgages.
The deleveraging of America is happening right before our eyes and for some it is welcome news. Of course, there is a consequence to this, the money that was coming out was keeping our economy humming. Think about it for a second. If money is being saved it is not being spent creating jobs and buy “stuff”.
But the irrational purchasing during the past decade may have kept employment high and businesses humming, it was still an artificial bump. The consumers bringing money to the table to refinancing their mortgages is a great example. They will be able to save on costs like Private Mortgage Insurance and have the opportunity to qualify for lower mortgage rates.
The savings on these cost will provide a more disposable income for families, income that will not be predicated on debt that must be re-payed down the line.
America is wising up…
Now the pendulum in consumer psychology appears to be swinging toward reduction of household debt — whether on credit cards or mortgages.
In Freddie Mac’s latest quarterly survey of refinancings, 33% of homeowners put cash into the deal to lower their mortgage balances, the highest percentage ever. By contrast, only 27% of refinancers took cash out — the lowest percentage on record.
Why shift money from savings into your house? Nothaft says a small percentage of refinancers — including himself and his wife — traditionally have preferred to lower their mortgage balances whenever possible.
There are at least two key rationales for doing so, Nothaft says. No. 1: If interest rates are low and you’re getting minuscule returns on your bank savings or money market funds, paying down your home loan may well provide you a better return on your investment. via the LA Times
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That’s great news! If the American people are getting better at avoiding risky, pointless loans, then the banks are going to have to change their tune, and soon!
America is not wising up, fo’
They are paying down the mortgage because the appraisals are coming in too low and they have to in order to get under the LTV guidelines.
Missed the point again….
What is an LTV guideline Eddie?