|Bankers’ willingness to lend has not recently been matched by borrowers’ desire to borrow, the government reported, but adjustable rate loans — well suited for such institutions — are responsible for the growing share of real estate-secured loans in the sector.
Nearly 30% of U.S. banks reported weaker demand for mortgages to purchase a home, according to the Federal Reserve Board’s announced January 2005 Senior Loan Officer Opinion Survey on Bank Lending Practices. The figure is about the same as in the October survey.
Among other things, the survey addressed changes in the supply of, and demand for, bank loans to households over the past three months. The Fed said it received responses from 55 domestic banks, which were to consider only purchase originations.
Fifteen banks reported moderately weaker demand, one reported substantially weaker demand. Of the remaining banks, 33 said demand was about the same as in the previous three months and two said it was moderately stronger.
Banks were asked why the share of industry assets accounted for by residential real estate loans has noticeably risen over the past three years.
Most, or about 75%, of the respondents believed the growth was due to an increased share of adjustable-rate loans, which are better suited to holding in banks’ portfolios. Two-thirds of the banks said strong demand for residential mortgages had supported returns on them, making such loans more profitable to hold. The third most popular reason, coming from half of the banks, indicated that a widening in the spread between yields on residential mortgages and those on mortgage-backed securities had increased the attractiveness of the underlying loans.
The next most popular answer as to why assets grew came from one-quarter of respondents who said it was because a larger share of their originations did not conform to the standards set by the housing-related government-sponsored enterprises. About 75% of the banks that had reduced sales of mortgages to GSEs claimed that their capital was sufficient to support that growth, but a few banks reported limiting acquisitions of other assets as a result of the retained mortgages.
Although standards and terms on credit card and other consumer loans were about unchanged, 12% of the respondents indicated that their willingness to make consumer installment loans had increased, the Fed reported.
So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...