A large mortgage industry group is predicting home lending to take a sizable drop in 2014.
In a statement this week, the Mortgage Bankers Association projected that the volume of all new mortgages written in 2014 will dive by nearly one-third, from $1.75 trillion this year to $1.19 trillion next year.
What will be responsible for the decline are mortgage refinacings, which have already been dropping in recent months as interest rates rise and has subsequently spurred widespread bank layoffs of thousands of mortgage-related jobs in metro Phoenix and nationwide.
The MBA predicts mortgage refinancings to plunge 57 percent year-over-year, while purchase mortgages should increase by 9 percent.
“We expect mortgage rates will increase above 5 percent in 2014 and then increase further to 5.5 percent by the end of 2015,”Jay Brinkmann, MBA’s chief economist and senior vice president for research and education, said in the statement. “As a result, mortgage refinancing will continue to drop, and borrowers seeking to tap the equity in their homes will be more likely to rely on home equity seconds rather than cash-out refinances.”
The average rate for a 30-year fixed mortgage stood at 4.15 percent on Wednesday, down from 4.29 percent last week but still much higher than the 3.5 percent record lows that ended in early May, according to Bankrate.com.
“We are projecting home purchase originations will increase in 2014 due largely to gains in home sales and home prices,” Brinkmann said. “We expect to see a decline in the share of sales paid for with cash, and higher average (loan-to-value ratios) on purchase mortgages, due to the rise in home prices.”
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