Despite higher interest rates, purchase mortgage originations in the first half of this year soared across the nation, according to a survey conducted by TRW REDI Property Data.
The survey, measuring lending in 21 states and the District of Columbia, found that the dollar value of purchase loans rose 29% in the first six months of 1994, compared with the same period in 1993. The number of loans also leaped, increasing 25% from 1993.
"I don't think that the rise in rates had a substantial negative impact," said Nima Nattagh, a market analyst with TRW. "It was far outweighed by increased consumer confidence and a strengthening national economy."
Purchase mortgage originations increased in all states in the survey, including California, always a key state in mortgage lending. The dollar value of purchase mortgages in that state hit $32 billion in the first six months, up 26%.
The largest increases were registered in Michigan and Oregon, which surged 68% and 55%, respectively. The smallest increase was in Delaware, a rise of just 6%.
According to TRW, a number of factors combined to give more first-time homebuyers access to credit. "The move to [lower down payments] combined with access to lower-interest-rate adjustable mortgages made it easier for entry-level buyers," said Mr. Nattagh.
The low rates available through adjustable-rate mortgages pegged to the 11th district cost-of-funds index might have diminished the effect of rising rates on the purchase lending market, according to Mark Zandi, chief economist at Regional Financial Associates, a West Chester, Pa., consulting firm. "People have been able to circumvent higher rates by moving into ARMs." That may not be true going forward.
"We will see a more definitive slowing in originations volume in the second half of the year," said Mr. Zandi. "Higher rates are beginning to bite and slow activity, and we will see gains of only 0% to 5% and declines in 1995."
"Growth in purchase mortgage originations... could slow down if mortgage rates continue to climb up during the remainder of this year," said Mr. Nittagh.
[Tabular Data Omitted]