USA Today: Americans shed mortgage debt at record pace
Americans are reducing mortgage payments at a record clip, directing cash that once went for debt into consumer spending and savings.
Low interest rates, defaults and refinancings have shaved more than $100 billion off the nation's annual mortgage bill — an amount comparable to all unemployment benefits for one year or this year's Social Security payroll tax cut.
"This is a form of economic stimulus that goes to Main Street rather than Wall Street," says Nicholas Carroll, a journalist on consumer finance and author of Walk Away From Debt for a Better Future. When freed from a mortgage payment, people's first purchases tend to be necessities, such as socks and underwear, he says….
… Economic effects of lower mortgage debt:
•Savings. For the first time since 1998, households are saving more than they're spending on mortgage interest.
•Interest. Mortgage interest consumes 5.27% of the nation's after-tax income, the lowest since 2004 and comparable to the 1980s and '90s.
•Rates. The average interest rate on all mortgages — not just new ones — has fallen for 16 consecutive quarters to 5.96%, the lowest since the government started keeping track in 1977. The tumbling rate reflects borrowers restructuring loans to become better credit risks and shortening 30-year mortgages to 15-year loans.
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