The recent surge in mortgage rates has impacted expected refinance originations, with next year’s outlook being slashed by more than $170 billion.
Including refinances and purchase financing, U.S. home lenders are expected to generate $485 billion in residential loan production during the fourth quarter.
Volume is then expected to tumble to $300 billion in the first-three months of next year and bounce up to $450 billion during the second-quarter 2017.
Freddie Mac, which made the predictions in its November 2016 Economic & Housing Market Forecast, cut its first-quarter 2017 forecast from $340 billion projected last month, while the second-quarter 2017 outlook was reduced from $460 billion.
Based on Freddie’s expected refinance share, refinance originations are expected to go from $228 billion in the current quarter to $105 billion in the following three-month period. The first-quarter 2017 projection was reduced from $146 billion in the October outlook.
Purchase-money originations are anticipated to fall from $257 billion in the fourth quarter to $195 billion in the first-three months of next year.
Full-year overall originations are expected to decline from $2.000 trillion this year to $1.505 trillion next year.
The 2017 forecast was reduced from $1.650 trillion a month earlier.
Freddie lowered its 2016 refinance outlook to $0.940 trillion from $1.000 trillion in the October forecast. Next year’s refinance projection was slashed to $0.421 trillion from $0.594 trillion.
Refinance share is expected to thin from 47 percent this year to 28 percent in 2017.
But Freddie raised its 2016 purchase financing forecast to $1.060 trillion from $1.000 trillion, while next year’s purchase outlook inched up to $1.084 trillion from $1.056 trillion.
Loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs are expected to account for 21.7 percent of 2016 originations and 24.5 percent of 2017 activity.
