Mortgage rates may be low, but home-equity loans are souring at record pace

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For borrowers who can qualify, mortgage interest rates remain terrific: the typical fixed rate for a 30-year home loan this week was 5.09%, the third straight week the average has been just above 5%, Freddie Mac said today. But in today’s economy, how many can qualify?

An American Bankers Assn. report today illustrated homeowners’ struggles to repay debts they already have shouldered. Home equity loan delinquencies jumped from just over 4% in the second quarter to a record 4.30% of all accounts in the third quarter.

Delinquencies on home equity lines of credit also hit a new record, rising from 1.92% to 2.12% of all accounts, the bankers group said.

The troubles with housing debt contrasted with a general decline in consumer loan delinquency rates, as the economy begins to stabilize, recession-chastened borrowers pay down debts and banks write off dud loans as uncollectible. Delinquency rates improved in the third quarter on loans for cars, home improvements and even boats and recreational vehicles, the bankers group reported in its quarterly survey.

The survey by Freddie Mac, the government-controlled mortgage buyer, was conducted Monday through Wednesday and should be posted on Freddie’s news site later today. It assumed that borrowers had good credit, a 20% down payment or equity in the home, and paid 0.7% of the loan amount in upfront lender charges, or points.

Last week, the average for a 30-year fixed loan was 5.14% and the week before 5.10%, Freddie Mac said. For the seven weeks before that, the average rate was less than 5% as government support for the mortgage market took effect, including heavy buying of mortgage bonds by the Federal Reserve. Last year at this time, the 30-year fixed rate mortgage averaged 5.10%.

Other mortgage rates, according to Freddie Mac:

--The 15-year fixed rate averaged 4.50% with an average 0.7 point, down from last week’s 4.54% and 4.83% a year ago.

--The rate for a hybrid home loan, fixed for five years and then fluctuating with yields on Treasury securities, averaged 4.44% this week with 0.6 point, unchanged from last week and compared to 5.57% a year earlier.

--The 1-year Treasury-linked adjustable rate mortgage averaged 4.31% this week with an average 0.6 point, down from last week when it averaged 4.33%. At this time last year, the one-year ARM averaged 4.85%

-- E. Scott Reckard