MBA: Mortgage Originations to Drop 32% in 2014

The Mortgage Bankers Association (MBA) on Tuesday projected that mortgage originations will decline 32% during 2014 due to a substantial decline in expected refinance activity. 

Mortgage originations are expected to total $1.2 trillion next year, nearly a third less than 2013.

Purchase originations will increase a projected 9% to $723 billion, but refinance originations will fall to around $463 billion, representing a 57% decline from 2013’s $1.08 trillion. 

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“We are projecting home purchase originations will increase in 2014 due largely to gains in home sales and home prices,” said Jay Brinkmann, MBA’s chief economist and senior vice president for research and education, in a statement. “We expect to see a decline in the share of sales paid for with cash, and higher average LTVs on purchase mortgages, due to the rise in home prices.”

Mortgage rates will rise above 5% in 2014, MBA predicts, increasing further to 5.3% by the end of 2015. As a result, says Brinkmann, mortgage refinancing will continue to drop.

“[B]orrowers seeking to tap the equity in their homes will be more likely to rely on home equity seconds rather than cash-out refinances,” he said. 

There is potential for an uptick in refinances toward the end of 2015 as the Home Affordable Refinance Program 2.0 expires, but HARP activity in 2014 will likely be low.

MBA also expects the Federal Reserve to begin tapering its asset purchases under the quantitate easing program in early 2014 and ending it by September of next year. The first Fed fund rate increase is expected to happen around mid-2015. 

Written by Alyssa Gerace

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