More Good News for Mortgage Industry
Mortgage bankers group forecast $2.43 trillion industry production for 2004
March 16, 2004
By MortgageDaily.com staff
The country’s primary mortgage banking trade group has raised its estimate for mortgage closings this year, reflecting a sustained low mortgage rate environment.
According to its revised mortgage finance forecast, the Mortgage Bankers Association of America (MBA) said Monday that mortgage originations will amount to $2.5 trillion this year, up from last month’s prediction of $2.0 trillion.
The revision follows similar adjustments by Fannie Mae economists, who last week raised their estimates for 2004 industry originations from $1.91 trillion to $2.43 trillion.
MBA said the key driver of the new forecast is its latest outlook that mortgage rates will remain low longer than previously expected. The group said it expects the 10-year Treasury yield to average only 3.9% in the second quarter and go up to 4.1% in the third quarter. The average 30-year fixed mortgage rate, which sunk to 5.41% last week, will remain at this level into the second quarter and then increase slowly, added MBA.
The Washington D.C. trade group said the continued low interest rate environment will result in record purchase volume — $1.4 trillion, or 54% of total originations — while “surprisingly strong” refinancing activity will compose the remaining $1.1 trillion. The figures are up from February’s predictions of $1.3 trillion and $0.7 trillion, respectively.
MBA chief economist Doug Duncan noted that rates have remained low because productivity gains and the effect of imports has held down inflation; increased corporate profits have held down the necessity to fund new business through debt; “and perhaps most importantly,” slow job recovery holds the Fed from raising short term interest rates “any time soon.”
