As mortgage rates hover at record lows and the jobs scenario improves, experts at the Mortgage Banking Association forecast a rise in home loan applications in the United States in 2015.
In a convention in Las Vegas, Michael Fratantoni - chief economist at MBA - said that as economy improves, more mortgages will be applied for which will in turn lead to more home sales, MarketWatch reports.
New purchase mortgage applications will see 15 percent growth in 2015, while refinancing applications will fall 3 percent, the MBA predicted.
Commenting on the calculation, the association explained that it expects the U.S. economy to generate an average of 220,000 jobs every month with the unemployment rate falling to 5.4 percent by the end of 2015. The decline in unemployment could very well bolster home-buying activity in the country.
Also, most experts believe the global economic gloom could hold down mortgage rates to its current lows for quite some time. Even the U.S. Federal Reserve said it won't raise short-term borrowing rates before mid-2015. This could help potential buyers achieve their dream of homeownership.
Some economists were worried about the tight lending standards prevailing in the market. Even former fed chief Ben Bernanke's refinancing application was rejected as it failed to meet the lofty approval conditions.
But that is changing now. More recently it was reported that smaller lending firms were obliging slightly-risky customers, approving mortgage loans despite a small drop in the credit score. This would have been impossible five months back but considering the market recovery, loosening credit standards seem to be on the cards.
"Historically, as lenders face a more competitive market for loan volume, it's not uncommon to see some loosening in the lending standards; however, this time, the easing will likely be around the edges," Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a statement earlier last month.
"Larger lenders are expecting to tap into the non-GSE-eligible and government loan market to maintain or grow their market share and offset their anticipated slowing mortgage demand as the peak spring/summer selling seasons are coming to an end," Duncan added.
True to the prediction, the Federal Housing Finance Agency - the association that controls Fannie Mae and Freddie Mac - announced Monday that it was easing lending standards. In the coming few weeks, the FHFA would extend loans to customers with just 3 percent down payment.
"It's definitely a step in the right direction, but there are still broader issues," Tom Wind, head of mortgages at Jacksonville's EverBank Financial Corp., told Bloomberg commenting on the risk of loose lending and the penalties that banks could face if the loans went sour like the 2008 market crash.
