Mortgage Lending Volume Expected to Fall Below $1 Trillion in 2011

October 27, 2010 No Comments »


Mortgage lending volume is expected to fall from an estimated $1.4 trillion this year to slightly under $1 trillion in 2011, according to a forecast from the Mortgage Bankers Association.

The drop in loan origination will be driven by a decline in refinance applications, slightly offset by an increase in purchase originations.

Refinance originations are estimated to total $921 billion this year, a 31 percent decrease from the $1.3 trillion seen in 2009.

And refinance activity will decrease by 60 percent in 2011 to about $370 billion as mortgage rates increase and the pool of eligible borrowers dwindles.

It gets worse…in 2012, it will fall to just $310 billion, pushing the refinance share of originations from 66 percent in 2010 to 37 percent in 2011, and then 26 percent in 2012.


Meanwhile, purchase originations will total $480 billion this year, roughly 28 percent below the $665 billion seen last year.

They are expected to rise about 30 percent in 2011 as existing home sales recover and home prices stabilize, and should increase again in 2012 to $877 billion.

So that’s the good news, if you want to call it that.

Mortgage Rates Heading Toward Six Percent

Fixed mortgage rates are expected to hover around 4.4 percent in the fourth quarter, then increase to 5.1 percent by the end of 2011, and continue towards 5.7 percent in 2012.

So yes, you may want to fix your mortgage rate sooner rather than later, assuming you plan to stay in the home a while.

But there’s probably no rush to buy a home, since home prices continue to be under pressure thanks to growing inventory and weak demand.

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