St Casimirs Mortgage Minute

Lending Plunges to 17-Year Low as Rates Curtail Borrowing

U.S. mortgage lending is contracting to levels not seen since 1997 as rising interest rates and home prices drive away borrowers, according to the Mortgage Bankers Association. Wells Fargo and JPMorgan Chase, the two largest U.S. mortgage lenders, posted a January-through-March decrease in loan volumes that is part of an industrywide drop off. Lenders made $226 billion of mortgages in the first three months of the year, the smallest quarterly total since '97 and less than one-third of the 2006 average. Lending has been tumbling since the middle of last year when mortgage rates rose nearly a percentage point after the Federal Reserve announced that it might taper stimulus spending. A surge in all-cash purchases to over 40 percent has bolstered housing prices, but has squeezed more Americans out of the buying pool. That will help push lending down further this year, according to the MBA.

From "Lending Plunges to 17-Year Low as Rates Curtail Borrowing"
Bloomberg (04/14/14) Howley, Kathleen M.; Tracer, Zachary; Perlberg, Heather