Over the last two days, the Austin lending market has changed dramatically for the worse.
As the subprime lending crisis has evolved into a global problem—the bankruptcy of two large lenders seems to have tipped the scales — the market spotlight has turned a negative eye on every participant in the residential mortgage market. As the bad news has spread, lenders are dramatically cutting back on loans — and rapidly raising rates at the same time.
The market changes in Austin over the last 48 hours are dramatic:
– A number of lenders, especially brand name lenders such as Wells Fargo and Bank of America have hiked jumbo (>$417K) mortgage rates from 6.8% to over 8.0%. Many other lenders seem to be following.
– Specialty loans — especially loans that do not require income verification or documentation — have quickly disappeared. These loans, which were commonplace a week ago, are now very difficult to come by. The same is true for loans that do not require a full 20% down payment.
– It has been reported that large loans (>$1.5M) are now very difficult to obtain, even for people in a very strong financial position.
These changes are bad news for buyers — especially buyers who have placed deposits, are stretching their budget, and haven’t locked in their final loan. We’ll see how the marker evolves over the next few weeks. While anything could happen, most experts believe that the mortgage lending environment will get worse before it gets better.