Looking Ahead at the Next Decade for Mortgage Finance

WASHINGTON – With record low mortgage rates the mortgage industry enjoyed for the last couple of years now a thing of the past, what’s in store for mortgage lenders in the coming decade? According to a report issued by Freddie Mac last month, in the decade spanning 1994-2003 American families took out $15 trillion in single-family mortgage loans. Over the next decade, mortgage originations are projected to average nearly $3 trillion per year. Residential mortgage debt is projected to grow at close to an 8.25% annualized rate, which would more than double the amount of debt outstanding to more than $17 trillion. Freddie Mac estimates the U.S. homeownership rate should exceed 70% within the next few years. The housing Government-Sponsored Enterprise opines that “home-value appreciation has been the largest single component of the growth in mortgage credit demand.Over the last decade, the annualized growth rate in home values has been about 5 percent. Appreciation is expected to average around 5 percent per year, close to the 50-year trend, over the next decade.” As of year-end 2003, residential mortgage debt outstanding in the U.S. was $7.8 trillion, including $7.3 trillion secured by one- to four-family homes and $0.5 trillion backed by multifamily properties of five or more dwelling unites. Freddie Mac says that was more than double the amount of residential mortgage debt outstanding 10 years ago – $3.4 trillion as of year-end 1993. The GSE estimates a growth of 8.25% annually will lead to a similar increase in debt outstanding, “a better than doubling of mortgage debt in the next decade. By the end of 2013, mortgage debt will total $17.2 trillion, with an 8.25 percent annual increase; a faster growth rate of 9.5 percent per year will place the residential mortgage debt need for America at $19.2 trillion.” -