A Reuters article reports that the Mortgage Bankers Association expects that total mortgage lending will fall to the lowest levels since 1997 as a result of the poor economy, increased interest rates, and tighter credit and underwriting standards. In 2009 mortgage volume totaled $1.995 trillion. In 2010 it was down to $1.505 trillion, and is expected to fall to $966 billion in 2011.
The MBA predicts that refinance volume will plummet by 66 percent in 2011. In 2010, refinancings totaled $1.032 trillion, but are predicted to fall to $352 billion. Refinancing made up over 70 percent of total mortgage volume in 2010, but is expected to account for less than 40 percent in 2011.
Purchase loans are expected to increase from $473 billion in 2010 to $614 billion in 2011. This would still put purchase volume below 2009′s level, and 2009 wasn’t that great a year for purchases in the first place.
The MBA expects that mortgage rates will increase to as much as 5.3 percent in 2011, and will move close to 6 percent in 2012. I have no idea what these predictions are based upon, and it is worth noting that past MBA predictions were not particularly accurate, as can be seen here and here. I think that if we see a significant stock market correction when QE2 expires, we could actually see rates drop in the coming quarters, but I’ve been wrong in the past as well.
I guess there are two takeaways here: first, 2011 will likely be a rough year for those in the mortgage business; second, nobody knows where rates will go, but if you have been considering refinancing and have yet to do so, you may want to do it now in the event that rates do indeed rise.
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