Just days after predicting that this year’s mortgage originations would fall to their lowest level in volume since 2007, the Mortgage Bankers Association is changing its tune—singing at a higher note.
Now, because the MBA believes loan rates will remain at or near record levels for the remainder of the year and more borrowers will turn in their old, higher-rate mortgages for new, lower-rate ones, it has revised its forecast for 2012 upward to $1.28 trillion.
Indeed, the new estimate, which is slightly above the $1.26 trillion in new loans written in 2011, is based entirely on a jump in refinancing to $870 billion. At the MBA’s National Secondary Market Conference in New York earlier this month, economist Michael Fratantoni said refis would decline from $858 billion in 2011 to $682 billion this year.
But now the MBA believes the pace of refinancing will pick up through the year as mortgage rates remain low.
At the same time, though, the MBA is backing off a bit on its last projection for purchase money originations, saying now that they will reach just $409 billion in 2012. That’s down $6 billion from the $415 billion the MBA was forecasting in New York, reflecting lower than previously expected home prices and weaker than previously expected home sales.
“Scenarios we have consistently highlighted that could drive rates down and refis up have materialized, primarily due to market turmoil in Europe,” said Fratantoni, MBA’s vice president of research. “Thus, we are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result.”
Meanwhile, Freddie Mac reported in its latest Primary Mortgage Market Survey that record low rates remained steady this week, with the benchmark 30-year fixed-rate mortgage ticked slightly down to 3.78% and 15-year fixed-rate mortgages remained unchanged from last week at 3.04%.
At the same time, Bankrate.com said the average rate for 30-year fixed loans is now at 3.97%, according to its weekly national survey, while the rate on 15-year loans averages 3.19%.
