The Mortgage Bankers Association (MBA) raised its expectations for mortgage performance in 2015 with a strong outlook for originations in the next year.
MBA announced Tuesday that it expects to see $1.19 trillion in mortgage originations during 2015, a 7% increase from 2014. Additionally, the Association also anticipates purchase originations will increase 15% to $731 billion next year, while refinance originations are expected to drop 3% to $457 billion.
“We are projecting that home purchase originations will increase in 2015 as the US economy continues on its current path of stronger growth, job gains and declining unemployment,” said Mike Fratantoni, MBA’s chief economist and senior vice president for research and industry technology in a written statement. “We are forecasting that strong job growth, coupled with still low mortgage rates, should translate to an increase in home sales and purchase originations.”
For 2016, MBA is forecasting purchase originations of $791 billion and refinance originations of $379 billion, for a total of $1.17 trillion.
MBA revised its estimate of originations upward for 2014 to $1.11 trillion from $1.01 trillion, and for 2013 to $1.85 trillion from $1.76 trillion, to reflect the most recent data reported in the 2013 Home Mortgage Disclosure Act data release.
There is optimism for activity on the refinance side in the year ahead, especially as low mortgage rates provide further encouragement for borrowers who have been seeing their equity return following the market crash.
“With the recent drop in mortgage rates, some borrowers now have an incentive to refinance and with the home price gains of the last two years more homeowners have enough equity to refinance, so we expect a pickup in refinance application activity over the next few months, which will lead to higher refinance originations in early 2015,” said Fratantoni.
Overall, MBA projects economic growth of 2.9% in 2015 and 2.4% in 2016, gains which will be driven mainly by strong consumer spending and business fixed investment, as households continue to spend on durable goods such as cars and appliances, and as businesses invest in new plant and equipment.
“Moreover, after several years of contraction, the rate of government spending should no longer be a drag on the economy,” Fratantoni said.
The 10-Year Treasury rate will remain below 3% through the first half of next year, however, if U.S. economic growth continues and global turmoil diminishes, MBA expects the rate will exceed 3% in the second half of 2015 and will continue to increase through 2016.
“We expect the Federal Reserve will keep short-term rates near zero until mid 2015, when we expect to see the first fed funds rate increase,” said Fratantoni.
Written by Jason Oliva