This Capital Economics chart shows the mortgage-lending turnaround

“Sharp rise in purchase applications”

The market for new mortgage may not be exactly roaring back, but the latest client note from economic analysis firm, Capital Economics, finds mortgage lending will likely improve next year.

“The sharp rise in home purchase mortgage applications, to a two-year high in April, was an encouraging sign that the market may finally be turning a corner after years of stagnation,” said economists Andrew Hunter and Ed Stansfield.

“Admittedly, applications are still well below the level of home sales, and previous increases have proved to be a false dawn,” they add. “But with credit conditions gradually loosening, the labor market continuing to strengthen and mortgage affordability set to remain very favorable for the foreseeable future, we expect that this will be the start of a more meaningful upturn.”

This is the chart that drives Hunter and Stansfield’s collective enthusiasm. It shows the positive movements in the purchase mortgage market (click to enlarge).

Capital Economics

What’s more, the economists expect gross domestic product to increase next year, and stay strong.

"The slowdown in growth in the first quarter should prove temporary. We expect GDP growth of 2.8% for 2015 as a whole,” they said. “With the Federal Reserve now unlikely to raise interest rates before September, mortgage rates should stay lower for longer.”

Here's is that projection, click to enlarge:

Capital Economics

3d rendering of a row of luxury townhouses along a street

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