Home lending in the United States will likely to drop below US$1 trillion in 2011 to the lowest level since 1996, according to the mortgage trade group Mortgage Bankers Association (MBA).
The MBA said mortgage originations in the US will drop to US$996 billion next year, from US$1.4 trillion projected this year.
Mortgage rates, which are unlikely to go lower even if the Federal Reserve Bank acquires more US debt, will likely to cause refinancing to dissipate by the second half of 2010, said, Jay Brinkmann, chief economist at MBA.
Dan Arrigoni, chief executive at Minneapolis-based US Bancorp’s mortgage unit, said that “with these interest rates, you cannot be having a bad year in 2010. It will probably go down as ranking No. 1 or 2 for us, both in terms of production and profits.”
Mortgage rates are influencing refinancing level even during the last explosion due to tighter lending standards, as well as the nearly 30 percent decline in US property prices since its 2006 peak, limiting the use of consumer cash-out refinances to tap home equity, said Mr. Brinkmann.
Total lending in the country will decline next year due to the fall of refinancing “as mortgage rates increase and the pool of eligible borrowers shrinks,” said MBA in a statement. More home loans will offset some of the decline, as “existing home sales recover and home prices stabilise.”
Mr. Brinkmann noted that the year’s US$480 billion estimated home-purchase mortgages would be the lowest since 1993, and in 2011, such lending may increase to US$626 billion, as refinancing mortgages fall to US$370 billion from US$921 billion.