Home lending falls to lowest level since 1995

September 24th, 2012

New data reveals mortgage lending has dropped to a new low due to tight credit conditions.

Mortgage rates are at their lowest levels in history and homeownership has exceeded renting in terms of affordability. Despite these conditions, fewer individuals may qualify for financing due to tight income and credit restrictions, as evidenced by new report.

The Federal Financial Institutions Examination Council released new data that reveals the volume of U.S. home lending dropped 10 percent last year to the lowest level since 1995. The group of regulators noted that home loans fell to 7.1 million in 2011 from 7.9 million in 2010. The data takes into account mortgages, refinancing and home improvement loans.

Although the Federal Reserve recently increased its investment into mortgage-backed securities to drive rates even lower, some experts have long argued that low rates will not be enough to spark the housing sector back to life. Instead, hesitant lenders must free up more financing and ease their credit restrictions in order for the housing market to reach sustainable levels of recovery.

Analysts note that failing to loosen lending restrictions may detrimentally impact housing market activity in several categories, ranging from baby boomers trying to refinance and young adults buying their first home to workers trying to obtain a relocation mortgage for a home in a new location.