Bankers group boosts forecast for loan volume

March 21, 2004|By Bloomberg News

The Mortgage Bankers Association is boosting its 2004 lending volume forecast by 25 percent, to $2.5 trillion, saying mortgage rates will fall to the lowest levels since the 1950s.

The annual average rate for a 30-year fixed mortgage is likely to drop to 5.6 percent from a record low of 5.8 percent last year, the Washington-based group said in a statement last week. A month ago, the Mortgage Bankers Association had called for a 6 percent fixed rate and $2 trillion in borrowing.

Mortgage lending will rise as cheaper borrowing costs spur more people to refinance their loans, said the group's chief economist, Doug Duncan.

Fixed-mortgage rates fell to an eight-month low last week, in part because of sluggish U.S. job growth.

Last year, mortgage lending reached $3.8 trillion, the highest ever. About $2.5 trillion of that was for refinancing and $1.3 trillion was for home purchases.

Home sales will be the second-best on record this year, Duncan said. Fannie Mae and Freddie Mac, the top two mortgage financiers, have forecast a new high for sales this year, driven by low rates.

Although the average fixed rate will be lower this year, making homes more affordable, higher prices will hold back sales, Duncan said. Price gains for new and previously owned houses will average 4.5 percent this year, Duncan said. A month ago, he forecast 4 percent.

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