Borrowing expected to reach record $406 billion

May 23, 2004|By BLOOMBERG NEWS

Mortgage Bankers Association, the U.S. mortgage industry's largest trade group, expects homebuyers to borrow a record $406 billion this quarter as they try to beat a rise in interest rates.

That would be a 44 percent increase from the $282 billion lent last quarter, according to the bankers' group. It would also be 5.7 percent higher than the record $384 billion lent in the third quarter of last year, when people rushed to buy homes after fixed rates rose from a 45-year low in June.

More and more people are considering buying homes as they try to take advantage of rates before they move higher, said Jay Brinkmann, an economist with the bankers' group. Mortgage applications for home purchases reached the second-highest level on record during the first week of this month, according to the group's data.

"Rising rates have motivated a lot of people to get off the fence and buy, and higher home prices have increased loan sizes," Brinkmann said.

This month, Federal Reserve policy-makers kept the benchmark U.S. interest rate at a 45-year low of 1 percent but suggested that they might begin to increase borrowing costs to head off inflation.

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