Is this the end of bargain mortgage rates?
Home lending will fall by a third next year as interest rates rise, a mortgage industry group says in a new forecast.
The Mortgage Bankers Assn. said Tuesday that it expects to see $1.19 trillion in new mortgages written during 2014, down 32% from $1.75 trillion this year.
While loans made to purchase homes are expected to rise by 9%, refinance originations could tumble by 57%, the trade group projects.
Jay Brinkmann, the group's chief economist, said all-cash home purchases by bargain-hunting investors – a huge driver of home sales the past few years – are expected to taper off next year. That means a greater share of purchases will be financed with mortgages.
Lenders were offering the 30-year fixed-rate loan to solid borrowers last week at an average of 4.13%, according to Freddie Mac. While down sharply from recent levels, the average is much higher than the rates in the mid-3% range that triggered the refinancing boom.
Brinkmann said he expects mortgage rates to rise above 5% in 2014 and to increase further to 5.3% by the end of 2015.
The trends are expected to continue to pressure big mortgage lenders, which have been laying off thousands of employees as refinancing subsides and the backlog of delinquent borrowers shrinks.