The mortgage market, which had been beaten down by higher interest rates and weak home sales, is showing signs of perking up.
Home lending, which hit a 14-year low in the first quarter of this year, was much stronger than expected during the second quarter, Inside Mortgage Finance reported on Thursday.
The trade journal’s initial estimates showed lenders funded about $310 billion in residential mortgages in April, May and June, which it said was up 32% from the first quarter.
A sharp increase in long-term interest rates in June 2013 choked off a boom in homeowners refinancing their loans to save money. But rates this year, while well above their record lows, have defied economists' expectations by drifting lower instead of rising.
The Mortgage Bankers Assn. projects that lenders will originate $1.02 trillion in mortgages this year, with 42% of that being refinance loans. That’s down from $1.76 trillion last year, when the refinance share was 63%.
Other mortgage watchers have lower projections. FBR & Co. recently cut its 2014 origination forecast 8% to $989 billion from $1.08 trillion.
The trend could signal good news for major mortgage lenders such as Wells Fargo & Co., which on Friday will be the first of the big banks to report second-quarter earnings.
However, Inside Mortgage Finance reported that in general nonbank mortgage lenders are gaining market share at the expense of deposit-taking banks. It said the banks are being restrained by tougher regulation in the aftermath of the financial crisis.
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