Mortgages Expected to Become Less Affordable

The mortgage rates have marked an increase of approximately 1% from the first quarter of 2013 to the first quarter of 2014. This is not a significant percentage and the rates are still at very low levels. However, there are some other factors threatening to make home loans less affordable in the coming years.

The increase of about 1% of the mortgage rates has coincided with an average increase of the home prices of 9% from the beginning of 2013 to the beginning of 2014. The property market experiences growth again, but its growth rate is expected to exceed the growth in the income of the average house buyer by far. The labor market is also getting towards stability with the unemployment rate falling slowly but steadily. However, few employers can afford to increase the salaries of their workers and this trend will most certainly remain in the coming years.

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It has been estimated that around 75% of all active buyers in the country could afford to purchase a home with the use of a mortgage loan in the beginning of 2013. By contrast, in the beginning of 2014, the affordability rate has dropped to slightly less than 65%. The difference exceeding 10% can be explained with the combined growth in house prices and interest rates and the stagnant wages.

The decrease in housing affordability has already been clearly indicated in both the mortgage market and the housing market. The number of home loan applications has been falling steadily since the middle of February 2014. The number of home sales has hit the lowest point since the middle of 2012. The predictions that interest rates may increase considerably in one to two years’ time are also affecting the decisions of many home buyers.

The recent developments may have a downward pressure on both mortgage rates and house prices. So far, one positive effect has been the loosening up of the home loan qualifying criteria.



Mailynne serves as a content strategist and writer for She is ahighly task-oriented strategic planner and experienced writer. Over the past 10 years, Mailynne has managedcontent for both large corporations, non-profits and businesses. She specializes in managing digital marketing,branding and web development content. Mailynne has worked with a variety of local, national and international organizations.


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