Millions of Consumers Getting a Credit Score Boost – Industry Outlook

By August 21, 2018Industry Outlook

Mortgage Rates Ease –According to Freddie Mac reports, borrowers are getting more relief as the 30-year fixed-rate mortgage dipped again, averaging 4.53 percent. “The stability in borrowing costs comes despite the highest core inflation rates since 2008 and turbulence in the currency markets,” says Sam Khater, Freddie Mac’s chief economist. “Unfortunately, this pause in rates is not leading to increasing home sales.” Last week, mortgage applications for home purchases once again trailed levels from last year. “It’s clear that in some markets the combination of ascending home prices, limited affordable inventory, and this year’s higher rates are curtailing home buyer demand,” Khater says.

Millions of Consumers Getting a Credit Score Boost –Based on the New York Federal Reserve’s recent report, consumers who had at least one collections account removed from their credit reports are seeing an 11-point increase to their scores. An overhaul in how several major credit reporting agencies factor in negative credit information is prompting millions of consumers’ credit scores to rise. Collection events were struck from 8 million consumers’ credit reports in the 12 months ending in June. Critics have long claimed such dings to scores are prone to errors or that they’ve unfairly kept many out of the borrowing market. Equifax, Experian PLC, and TransUnion have all agreed to revamp reports, which stems from a 2015 settlement with state attorneys general involvement. In the settlement, the firms agreed to remove some non-loan related items that were sent to collection firms, such as gym memberships, library fines, and traffic tickets. The majority of consumers who benefited from the recent changes are those who had credit scores below 660 before the collection events were removed, according to the New York Fed.

Housing Market Predictions –According to the National Association of REALTORS®, there is an increased focus on whether a major home sales slowdown is in the making, in part because many hot housing markets are seeing slackening buyer demand, and nationally 2018 is expected to end with fewer home sales than 2017. But the possibility of a crash is unlikely, says Lawrence Yun, chief economist for the NAR. “Lending standards today are still stringent, as evidenced by the higher-than-normal credit scores of those who are able to obtain a mortgage,” Yun says. “That is why mortgage default and foreclosure rates are at historic lows.”

Builders Add More Inventory –Based on The Commerce Department’s recent report, the total housing starts for both single-family homes and multifamily building rose 0.9 percent last month to a seasonally adjusted annual rate of 1.17 million units. Homebuilding had a slight increase in July, but economists say it’s still not nearly enough to catch up with home buyer demand or to help cool rising home prices. Housing starts are 1.4 percent lower compared to the same month one year ago, the Commerce Department reports. But from year-to-date, housing starts are up 6.2 percent from the same period a year ago. Still, some economists say the lack of new homes entering the pipeline is not helping to lift inventory woes for the overall housing market.

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