Banks and other lenders don't have much growth in their home loans businesses to look forward to, thanks to a combination of rising interest rates, the winding down of the First Home Owners Boost and low growth in house prices.This is the scenario outlined in the latest JP Morgan and Fujitsu Consulting mortgage industry report, released yesterday.JP Morgan banking analyst Scott Manning said the home loan market bottomed a year ago when the annual growth rate reached 6.2 per cent. Since then government support in the form of the FHOB has helped the growth rate recover to its current annualised rate of eight per cent.Manning said that with the boost now being withdrawn, first home buyer impact on the market was dissipating. He said: "We view slowing housing growth rates as a more fundamental reflection of the exhaustion of meaningful house price appreciation."The report also highlights the fact that borrowers are vulnerable to rising rates. Fujitsu Consulting's Martin North said: "Australian households are as geared now as they were before the financial crisis. If rates go up by two percentage points in this round of tightening we will see households committing as much of their disposable income to debt repayments as they did before the crisis. Households are vulnerable."North said the best opportunity lenders had to increase profitability from their home lending businesses was to cut costs. He said lenders with low cost structures could originate a mortgage for around $500, while for inefficient operators the cost of origination could be as high as $1500.North said: "Areas of cost focus include optimising the valuation process, reducing re-work, simplifying application processes and simplifying redraws."Manning said there were two surprising outcomes from the period of very low rates this year: there was almost no household de-gearing and very few borrowers took the opportunity to lock in low rates."The total system LVR (housing mortgage debt to the market value of residential property) rose from 12.1 per cent in 1992 to 27.6 per cent in June 2009."There was a loss of momentum in the increase in housing outstandings as a percentage of disposable income at the onset of the crisis, but this percentage has subsequently rebounded at an all-time high of around 150 per cent."Household interest payments as a percentage of disposable income, while falling dramatically following initial rate cuts, hold the potential to return to around 11 per cent of total disposable income if interest rates increased by two percentage points."Manning said that borrowers preferred to bet that sticking with variable rates would be a better option than fixing. "It may be a case of once bitten twice shy. Over 20 per cent of households locked in fixed mortgage rates of between eight and nine per cent over the course of 20007/08 and paid substantial exit fees to break those contracts."