Is There A Bubble on the Other Side of the Low Mortgage Rate Market?

The capacity of the mortgage industry is astounding. Regardless of whom you speak to in the mortgage or real estate industry, home loan financing was never projected to offer the low mortgage rates. However, the novelty of purchasing a home at an affordable interest rate is causing concern for many industry insiders. According to the National Association of REALTORS (NARS), the lower-than-projected mortgage interest rates are expected to sustain healthy housing rates. However, to David Lereah, NAR's chief economist, even with low mortgage rates exceeding the expectations, a cloud of economic uncertainty continues to linger above.

But, in the opinion of Federal Reserve Chairman Alan Greenspan, the forecasts of the industry can be prognosticated in another way. Greenspan considers the availability of home equity has lowered costs and mortgage rates. As a result, the uncertainties associated with salary volatility, unexpected medical bills, retirement, and other life issues that can unexpectedly siphon savings account. As long has Americans have hundreds of billions of dollars in home equity, there is more than enough surplus to stave a so-called “housing bubble.”

The not so distant record low mortgage rates American homeowners have been able to refinance 10 million home loan mortgages (the figure does not represent home equity and construction loans). The value of all the low mortgage rates and home loans represented thirty percent or roughly more than 600 billion in mortgages loan. The recorded low mortgage rates have leveraged mortgage originations to approximately $2.5 trillion.

Refinancing and home equity lines are not taking a back seat in the mortgage market’s boom. More than $200 billion in home equity was cashed out for at low mortgage rates. Over seventy billion dollars was recycled to pay down debts. But with the affordability of many mortgage products who can resist the temptation of trading a high interest loan for a low mortgage rate?