HARP 2.0 and Supply and Demand
A few weeks ago, we wrote about changes in the Home Affordable Refinance Program, dubbed HARP 2.0. This latest incarnation of HARP will impact the supply-and-demand dynamics in the mortgage market, namely due to the removal of the 125-percent loan-to-value cap.
More borrowers will qualify for mortgage loans; that obviously means there will be more demand for mortgage loans. What's more, demand could increase sooner rather than later, particularly if borrowers who don't need HARP, but want to exploit today's low rates to avoid the possibility of a delay, ratchet up demand.
To be sure, HARP 2.0 will be a good deal for many mortgagors who have been unable to refinance because of diminished home equity. Many of these mortgagors will benefit, even if mortgages rates were to rise a full-percentage point or more.
Now, we're not forecasting a percentage point rise in rates when HARP 2.0 kicks into gear, but more demand does tend to raise costs, including the cost of mortgage financing. This is something borrowers who don't need HARP but who could take advantage of today's rates should think about, because many of them won't benefit if mortgage rates move significantly higher.
Courtesy of Jessica Regan.
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