Some squeezed as interest rises, home values sag

The Boston Globe reports:

Squeezed by rising interest rates, homeowners who stretched their finances to buy properties while the market was hot are scrambling to pay higher monthly payments on adjustable-rate mortgages that were the least expensive option at the time they purchased their homes.


An end to years of double-digit appreciation in Massachusetts home values has shut the door on refinancings that bailed thousands of homeowners out of bad financial decisions, said mortgage brokers and counselors as well as homeowners.

''The bottom line is so many people took the fashionable mortgage rather than the right mortgage," said Harry Brousaides Jr., president of NorthStar Mortgage Corp. in Westwood. Now, he said, ''they're sweating it and not knowing what the future will bring."

The main culprit of homeowners' woes was a 50 percent increase in home values in Massachusetts between 2000 and 2003, the largest rate of appreciation in the nation. Buyers struggling to finance a home took on mortgages with low adjustable rates that nevertheless swallowed half their monthly take-home pay, leaving little financial cushion.

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