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Oct 16 (Reuters) - Mortgage lending at U.S. banks is expected to drop in 2019 as rising borrowing costs likely reduce demand from homeowners to refinance their existing homes, the Mortgage Bankers Association said on Tuesday.
On the other hand, demand for loans to buy a home will likely persist due to rising wages and some deceleration in home values, according to the Washington-based industry group.
Total mortgage originations were projected to slip to $1.63 trillion next year from $1.64 trillion in 2018, MBA said.
Weaker lending is a challenge for the U.S. mortgage industry, which is already struggling with rising costs, MBA chief economist Mike Fratantoni said.
“Lenders of all types and sizes are seeing elevated costs, coupled with intensely competitive pricing, to capture more volume. This in turn is depressing revenues,” he said in a statement.
Loan supply for home purchases was forecast to rise to $1.24 trillion in 2019, up 4.2 percent from this year. It should grow to $1.27 trillion in 2020, the group said.
Refinancing mortgages are expected to fall to $395 billion next year, down 12.4 percent from 2018. They should increase to $410 billion in 2020, it said.
Refinancing activity has fallen due to rising mortgage rates which hit 7-1/2 year highs.
In the week of Oct. 5, interest rates on some 30-year home loans averaged 5.05 percent, the highest since February 2011, according to MBA. (Reporting by Richard Leong; Editing by Bernadette Baum)