A healthy housing market is expected to buoy purchase mortgage volumes this year, while rising rates will put a damper on refinancing, according to a report from rating agency DBRS.
While increasing, mortgage costs remain historically low. That factor is expected to keep levels of housing affordability high, DBRS estimated.
Furthermore, wage growth and an improved labor market are expected to offset the cost of home price appreciation nationwide. And rising rents will drive household formation and homeownership rates, as owning a home becomes a more attractive and affordable alternative.
Still, the mortgage industry does face headwinds, DBRS warned. Volatile capital markets and slower economic growth globally could put a strain on consumer confidence and other factors benefitting the housing market generally.
And while rates will not rise so much that they will be too high to provide certain benefits, they will cause a slowdown in refinancing activity. Generally, DBRS predicts that refinancing activity in the coming year will come from those who have not already taken advantage of low rates. As a result, overall residential mortgage volumes are expected to drop following this downturn in refinancing.
