Mortgage bankers raised their expectations for second-quarter originations as the outlook for refinances was boosted by nearly a quarter. But the projection might be trimmed in the next forecast given a recent surge in rates.
Home-loan production is predicted to come in at $318 billion in the first quarter then ease to $305 billion in the second quarter.
Last month’s outlook had fundings tumbling from $320 billion to $262 billion.
The forecast came Friday from the Mortgage Bankers Association, which sees fundings falling to $225 billion in the third quarter and $220 billion in the fourth quarter.
Behind the strengthened second-quarter outlook were refinances, which are projected to be $242 billion in the first quarter and $198 billion in the second quarter. Last month’s report had first-quarter refinance activity at $243 billion and second-quarter business at just $160 billion.
Purchase production is predicted to grow from $76 billion this quarter to $107 billion in the second quarter.
Refinance share is expected to go from a little more than three quarters during the first three months of 2012 to a less than two thirds in the second quarter. By the fourth quarter, refinance share is expected to tumble to less than half.
MBA might pare back its refinance numbers in next month’s forecast based on recently rising rates.
Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 3.92 percent, up from 3.88 percent a week earlier. Treasury market activity suggests that mortgage rates might be another 15 basis points higher in next week’s report.
The share of originations that will be adjustable-rate mortgages is projected to rise from 4 percent in the first quarter to 5 percent next quarter and 6 percent in the second half of this year.
For all of 2012, MBA has residential originations falling to $1.068 trillion this year from $1.262 trillion in 2011. Next year’s business is expected to amount to $1.022 trillion.