Borrowers feeling the pinch of rising rates

Newsday reports:

Some of the increase in the nation's delinquency rates actually has little to do with rising interest rates or even the changing real estate market, according to Doug Duncan, the chief economist with the Mortgage Bankers Association. Instead, he noted, the average loan now is 3 years old or less, and the peak of delinquencies come when loans are 3 to 5 years old.

Adjustable-rate mortgages have a higher rate of delinquency than fixed-rate mortgages, and there are more of them in the market now, Duncan noted. According to Irvine, Calif.-based RealtyTrac, which provides an online foreclosure marketplace, $2 trillion in adjustable-rate mortgages will reset in the next 18 months. And because those rates could eventually rise by several percentage points, that could mean a host of homeowners will be hit with 30 percent to 50 percent increases in monthly payments, noted RealtyTrac spokesman Rick Sharga.

"I have a bad feeling in the pit of my stomach that many homeowners have no idea what they're in for when those loans reset," he said.

While there's reason for concern, only a small percentage of homeowners fall into the most vulnerable categories. Indeed, 34 percent of all homeowners have no mortgage at all, Duncan said. Another 48 percent have a fixed-rate mortgage. The remaining 18 percent have adjustable-rate mortgages. And while those homeowners are more likely to have trouble, the biggest concern lies with the subcategory who have adjustable mortgages that started at below-prime rates. Only 6 percent of all homeowners nationwide have such loans, Duncan said.

You'll want to read the whole article.The long end of the curve seems to be in a higher interest rate trend.