Electronic commerce will fuel strong growth in outstanding US mortgage debt and help home ownership reach unprecedented levels, which could provide UK lenders with some useful lessons, according to Fannie Mae.
Speaking at its 16th annual investor visit, Franklin. D. Raines, chairman and chief executive officer at Fannie Mae, said: “Over the next decade, mortgage debt outstanding, which currently stands at $5 trillion, is projected to grow at a healthy pace of 6%-8% a year. This is faster than the computer, pharmaceutical and most consumer product markets.
“During the same period the US homeownership rate could reach 70%, adding 10 million new homeowners, particularly among minorities, lower income Americans and other underserved populations.”
“E-commerce will enable lenders to provide consumers with more customised mortgage products and further drive down borrowing costs. At the same time, it will reinforce and reward investor preferences for standardisation and liquidity.”
Along with e-commerce, Raines also outlined a number of other factors that would help levels of home ownership grow in the US.
For example, house price inflation, which at a national average of 5% is much lower than in the UK, is not pricing potential buyers out of the market. Lenders are also increasingly requiring a lower level of deposits from borrowers. Traditionally borrowers have been expected to pay a 20% deposit, but this has fallen to as low as 3% and even 0% in some cases over recent years.
“This is all making it a lot easier for families to buy their own home,” said Raines.
He said that between 1999 and 2003 the company’s revenues were likely to grow by 10%-14%, but the key to growing this revenue would be new product launches.
“There is now an increased demand for specialist products at attractive prices,” he said.
As a result, the company has been looking into the development of products in the near-prime market, a market it has not traditionally been associated with.