Mortgage Rate Shock Looms Large

\r\nMany homeowners in low-to-moderate income brackets only qualify for subprime loans. This situation causes concern for a watchdog that services these families, since these homeowners could be in for major rate shock soon. Subprime loans are adjustable rate mortgages that are normally much higher than prime loans. When the next adjustment comes up, many low income families are due to suffer from a large jump in their monthly payment.\r\n

Many low-income families are on fixed incomes, making the adjustments particularly painful. A raise of just 2% to the rate of an adjustable mortgage of $150,000 would push a payment from less than $1,000 to over $1,200. The group points out that many low-income families are minorities, making the problem now one of race as well as money. Though the statistics may point to this finding, mortgage rates are mostly determined by credit score and income, making subprime lending more expensive across the board.\r\n