Mortgage Lending to Fall 16 Percent Next Year

December 15, 2009 No Comments »

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Mortgage lending volume is expected to fall 16 percent in 2010 as the homebuyer tax credit expires and the Fed halts its mortgage buying program, according to a report from Keefe, Bruyette & Woods Inc. analysts.

KBW analysts Bose George and Jade Rahmani wrote in a research note today that they estimate residential loan originations to total just $1.6 trillion in 2010, down from $1.9 trillion this year.

Back in October, the MBA released its numbers for 2010, forecasting $1.5 trillion in total lending volume, down from an estimated $1.96 trillion this year.

In May, the bankers group had predicted 2010 loan originations to total $2.13 trillion amid a refinancing bonanza that turned out to have less behind it than originally thought.

Mortgage Rates to Rise in 2010

The KBW analysts also believe mortgage rates will rise after the Fed winds down its mortgage purchasing program in March, which should slow refinancing requests.

Additionally, they said the expiration of the homebuyer tax credit in April will lead to a tapering off in home purchases, leaving sales “flat” in 2010.

The MBA expects mortgage rates to increase to 5.6 percent by the end of 2010, which is still quite attractive historically speaking.

Unfortunately, the origination estimates are pretty dismal, mirroring those seen in disastrous 2008.

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