Magazine article American Banker

Harris Trust Predicts a Surge in Trading Up

Magazine article American Banker

Harris Trust Predicts a Surge in Trading Up

Article excerpt

Analysts at Chicago's Harris Trust Corp. are expecting homeowners to start trading up to nicer houses rather than fixing up their old ones. And that should stimulate the demand for purchase mortgages, they say.

The impulse to trade up is a timely one, says Brian Israel, a vice president in Harris' residential mortgage division. He and his colleagues expect refinancings to slow next year.

"We've told our mortgage originators to [expect] handling 50% to 75% fewer refinancings," Mr. Israel said.

Steady Rates Foreseen

But Mr. Israel is also expecting mortgage rates to hold fairly steady next year. "Inflation still seems under control. Nafta passed, and that should steady the bond market," he said. "And economic growth is improving but still slow. All of these things point to mortgage rates holding in their current range for the foreseeable future."

The analyst said he was not worried about the recent increase in mortgage rates. "Most analysts see this as more of a correction than anything else," he said.

Did applications for mortgage refinancings drop sharply during Thanksgiving week? The latest figures from the Mortgage Bankers Association suggest they did, and that would make it 11 straight weeks of declines. The index for the week was 879.0, down from 1,105.1 a week earlier. The year's high of 1727.3 was reached the week of Sept. 10.

But that may not be the end of the story, which could still be a week off. …

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