Mortgage Bankers Association: Rates to Hit 6.5 Percent in ‘07

Fixed mortgage rates are expected to rise to about 6.5 percent by the end of 2007, and sales of both new and existing homes are expected to slide this year, according to MarketWatch.com.

In an economic forecast, the Mortgage Bankers Association estimated that declines of 7 percent in existing-home sales and 8 percent in new-home sales will take place in 2007.

Over the past year, existing-home sales have fallen by 10.7 percent, the National Association of Realtors reports. Meanwhile, sales of new homes have fallen 15.3 percent over the past 12 months. However, the housing market is set to stabilize in the months ahead, the MBAA predicts.

“We believe that the housing market slowdown will have dissipated by mid-year,” the group’s head economist, Doug Duncan, told reporters Tuesday.

The mortgage bankers’ group said that as mortgage rates more or less hold steady, sales of both types of homes should bounce back by 3 percent in 2008 and by 1 percent in 2009.

• Total residential home mortgage loan production in 2007, meanwhile, will reach $2.39 trillion, down 5 percent from 2006.
• That means loan originations should fall 4 percent in 2008 and 6 percent in 2009, the MBAA said.
• Nationally, borrowing costs for a 30-year fixed-rate mortgage are currently averaging 6.13 percent, according to national surveys.

Kurt Pfotenhauer, the group’s senior vice president for government affairs, said in a statement that the bankers’ association will press lawmakers and the White House in the year ahead to reform government-sponsored mortgage companies Freddie Mac and Fannie Mae, reauthorize terrorism-risk insurance and set a new standard for combating predatory lending.

Pfotenhauer said during a press briefing the group is “encouraged” that new House Financial Services Committee Chairman Barney Frank (D-Mass.), has made cracking down on bad credit home loan abuses one of his top legislative priorities.

Lawmakers came close to passing a bill overhauling rules on Fannie Mae and Freddie Mac before the November congressional elections, but weren’t able to hammer out a compromise.

The bankers’ group said it’s pushing for an independent regulator for the companies that will set affordable housing goals and ensure a competitive secondary mortgage market.