The forecast for mortgage origination volume moved down for the first quarter of 2017 in the wake of the second interest rate hike by the Federal Reserve in a decade, according to data from the Mortgage Bankers Association.
The total volume of one- to four-family mortgage loan originations is expected to reach $352 billion in the first quarter, the MBA reported in its December Mortgage Finance Forecast released Wednesday following the Fed's announcement. In November, the MBA had predicted that first-quarter mortgage originations would add up to $365 billion.
The lower projection is still higher than the $350 billion in origination volume recorded in the first quarter of 2016. Compared to the MBA's projected $470 billion in fourth quarter 2016 originations, volume will be down 25% in the first quarter of 2017.
For the full year, the MBA is now predicting $1.571 trillion in loan origination volume, down from $1.584 trillion in the MBA's November forecast. Origination volume for all of 2016 is still expected to hit $1.891 trillion.
The Fed's rate hike decision came down in line with the MBA's anticipations, Mike Fratantoni, the organization's chief economist, said in a statement.
Digging down, refinance volume is expected to dry up fast in the first quarter, with higher interest rates in the wake of the presidential election having already put a damper on this market.
"We have adjusted the forecasted path of interest rates upwards slightly in our December forecast, and expect that refi activity will continue to fall during 2017," Fratantoni said. "We expect that purchase activity will be robust, backed by the strength of the job market."
Refinance volume is now expected to reach $140 billion in the first quarter, down from the November forecast of $145 billion. The MBA also projected that purchase origination volume will total $212 billion, down from its prediction of $220 billion last month.
As of now, the MBA maintains its November projections beyond the first quarter, which indicate further shrinking in the refinance market in both 2017 and 2018.