The Mortgage Bankers Association expects the Federal Reserve to increase interest rates four times over the course of this year.
During Thursday’s general economic outlook session at MBA’s Servicing conference, Joel Kan, MBA’s associate vice president of industry surveys and forecasts, told conference attendees that the organization expects four increases in 2018 and another two increases in 2019.
Kan said there is an expectation for a rising rate environment, given the domestic economic fundamentals against the job market. Increasing inflation and a strengthening economy feeds into the assumption that the Fed will raise rates, Kan told attendees.
As for the housing market, MBA is expecting an increase in home sales over the next couple of years, Kan said. “Purchase activity has been slow to grow but it’s coming back.”
“For a lot of us here, we’re concerned about originations and where that’s going to go,” he said.
MBA’s forecast shows an upward path for originations and a decline in refinances.
“As you know, rates have been going up and we’ve been seeing a lot less refi activity at similar levels than we have in the past but that’s going to be more than offset by the purchasing growth in the next several years, Kan told attendees.
“That’s what’s going to drive overall originations going forward,” he said.
According to Kan, the industry is looking at about $1.1 to $1.2 trillion in purchase originations over the next couple years. These levels, Kan noted, are the highest since 2006 and 2007.
“We are seeing slowdown in the refi market as rates increase. We’ve seen less responsiveness from borrowers as far as refi activity goes,” he said.
This slowdown in refis could be from borrowers already having refinanced or borrowers who are just waiting for their credit and equity positions to improve, Kan said.
Kan said there are encouraging signs for the purchase market and is expecting 6% growth on a year-over-year basis.
“Generally speaking we’ve seen healthy year-over-year growth in the purchase market for purchase applications between 2016, 2017 and 2018,” he said.
