As mortgage rates rise to 7% next year, 40-year fixed-rate mortgages will become more common in the Golden State, according to a recent survey of mortgage brokers.
Such prediction was derived from the California Association of Mortgage Brokers' fourth Annual Mortgage Forecast survey of 300 members statewide.
The outlook projects the 30-year fixed-rate mortgage average reaching nearly 7% in the coming year and the 40-year fixed rate loan becoming an important option, according to the survey results announcement.
Over 80 percent of the brokers believe rates would continue to climb, more than half believed the federal government would have some influence on mortgage rates, and about 60 percent believed the 40-year would be more economical for borrowers, CAMB noted.
The trade group also predicted that housing affordability will continue being a critical California issue amidst stabilizing home prices.
About 40% of respondents foresaw a rise in California prices and worsening affordability, according to the announcement.
While the moderate increase in rates is not of concern, "it is alarming that the housing affordability crisis will continue, making it difficult for first-time homebuyers to qualify for adequate financing," CAMB President John Marcell said in the statement.
In addition to the 40-year loan, the forecast reportedly sees reverse mortgages, 100 percent financing and adjustable-rate mortgages with low "start rates" amongst the popular products in 2006.
Over 70 percent of the respondents believe that alternative loans may be a solution for some, but risky for others, CAMB said.
"Alternative loans make the dream of homeownership a reality for some consumers, but it is important to realize they are not for everyone and they can be pitfalls," Marcell added.