Indiana saw its foreclosure rate soar in late 2006, and while no single cause for the increase has been pinpointed, one of the major ones certainly could be the legislation which allowed high-risk borrowers to purchase homes. These borrowers took out adjustable rate mortgages at much higher interest rates than home buyers with good credit ratings, and then saw the interest rate climb from 7% in 2004 to over 12% in 2006.

Those sorts of interest rate hikes will stretch the budgets of even the best-prepared homeowners, but Indiana foreclosures hit the least financially stable homeowners the hardest. It was completely legal for their lenders to write them adjustable rate mortgages and put them in homes which would ordinarily have been beyond their means.

But the lack of foresight from the owners, or perhaps their speculation that the value of their homes would keep rising with the housing boom, found them staying in homes which they could no longer afford as soon as the interest rates went up and the housing market fell down. And many experts believe the Indiana foreclosures rate will continue its upward trend for some time.

How Interest Rates Can Devastate A Budget

Adjustable rate mortgages are tied to the prime lending rate, meaning that the monthly interest which a homeowner pays will go up or down whenever the Federal Reserve alters the prime lending rate. And even a single percentage increase in the prime rate can be a fatal hit to some homeowners' budgets.

If, for example, a home buyer took out a $165,000 25-year adjustable rate mortgage which started at six percent, the monthly house payment would be $1,063. But if the prime lending rate were raised a single percentage point, the homeowner's interest rate would be raised to seven percent, and the monthly house payments would go up over a hundred dollars, to $1,166.

With families already having two breadwinners just trying to get by, health and energy costs increasing every month, and job security a thing of the past, the Indiana foreclosures picture begins to make sense.

Who Benefits From Indiana Foreclosures

With so many Indiana foreclosures available, those wanting to buy an Indiana home could do very handsomely by looking fore one at an Indiana foreclosures auction. Most lenders are happy to sell foreclosure properties at a significant discount to the fair market value, because they do not want to accumulate a backlog of them. As long as Indiana foreclosure homes remain empty, the lenders have to pay maintenance, insurance and property taxes on them, so they are happy to see them occupied.