According to a report from the Wall Street Journal,"the end of a three-decade period of falling mortgage rates has slammed the brakes on a huge wave of refinancing by U.S. households. The drop-off has deprived lenders of a key source of income at a time when the growth in loans for home purchases remains weak".
''The Mortgage Bankers Association next week plans to cut its 2014 forecast for loan originations, which include loans for home purchases and refinancing. The current forecast of $1.2 trillion would represent the lowest level in 14 years. The trade group Wednesday reported that mortgage applications in the two weeks ending Jan. 3 touched a 13-year low.
Wells Fargo & Co. and J.P. Morgan Chase & Co. are scheduled to report fourth-quarter results next Tuesday, kicking off a wave of bank earnings reports. Analysts expect results across the sector to show that the number of loan originations for home purchases and refinances fell by 20% to 30% in the fourth quarter from the previous quarter.
Already, banks across the U.S. have cut thousands of jobs in their "back office" mortgage operations to make up for the decline in refinancing activity. Wells Fargo has eliminated more than 6,200 mortgage jobs since the summer. Bank of America Corp. has said it hopes to cut about 4,000 jobs by the end of the fourth quarter. Citigroup Inc. has trimmed about 1,100 positions.
Now, refinancing is evaporating, said David Stevens, CEO of the Mortgage Bankers Association, and "the business is completely shifting" toward home-purchase lending as rates rise. The rate on a 30-year fixed-rate mortgage averaged 4.72% last week, according to the Mortgage Bankers Association, up from 3.6% last May".
