American mortgages dipping

New mortgages in the US could fall below £870 billion next year, the lowest for almost two decades, according to forecasts...

The recession is having too deep an effect on the property market for estimates of lending to be optimistic, forecasters say.

As recently as September research and consulting firm iEmergent was predicting that total mortgage originations in 2009 would be £1 trillion. Now it has lowered it estimate to £870 billion at best.

The Mortgage Bankers Association is forecast a slightly higher figure - £1 trillion and even that is well below what was expected six months ago.

'We expect the total volume to reach the bottom in 2009 and turn upward in 2010, but lenders should be prepared for volumes in many of their local markets and communities to drop even further if the recession deepens, unemployment levels continue to rise, home prices fail to stabilize and consumer confidence remains dismal,' said Dennis Hedlund, president of iEmergent.

Purchase mortgages, in particular, are expected to fall severely next year with iEmergent predicting total purchase volume of just 4.29 million loans for £473 billion during 2009, a five per cent slide from expected 2008 levels. The company does not expect purchase money loans to recover to long-term historical trending until 2012.

Hedlund said lenders have had ample time over the past 24 months to re-structure and prepare for the road ahead, by reducing costs and improving efficiency to meet the demands of a changed-market.

'Some 4.3 million purchase loans and 7.5 million total mortgage transactions or more is not a total collapse. But now is the time for lenders to tailor their lending strategies to the local markets if they are to compete effectively,' he added.

Source: www.propertywire.com