CHICAGO – Rising U.S. interest rates pushed home buyers toward fixed-rate mortgages in the second half of last year and will cut total home loan creation by 17 percent this year.
Lenders will issue about $2.4 trillion in loans in 2006, the fifth highest on record, after $2.9 trillion last year and an all-time high of $3.9 trillion in 2003, the Mortgage Bankers Association predicted.
The five highest years on record were all set this decade as interest rates fell to generational lows.
Thirty-year fixed-rate mortgages should end the year around 6.90 percent, considered low historically but high enough to stifle home refinancing and thus overall loan volume, the MBA said. Rising rates boosted the volume of both traditional and interest-only fixed-rate loans in the second half of last year, the trade group added.
While mortgage creation remains lofty, the current declines nonetheless put pressure on corporate earnings, said Doug Duncan, the MBA's chief economist.
