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Mortgage Bankers Lift 1st Half Refi Outlook

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Lower expectations for interest rates have apparently raised mortgage bankers’ expectations for refinance activity in the first half of this year.

From Jan. 1 through March 31, residential loan originations by all U.S. lenders, including refinancing and purchase financing, are expected to reach $294 billion.

Mortgage production is then expected to climb to $338 billion in the second quarter and settle back to $318 billion three months later.

The Mortgage Bankers Association, which made the projections in its
MBA Mortgage Finance Forecast for February, lifted its outlook from last month — when it predicted that volume would go from $281 billion in the first quarter to $332 billion then retreat to $318 billion in the third quarter.

The improved forecast was driven by refinances.

MBA lifted its first-quarter refinance projection to $150 billion
from $137 billion expected last month, while the second-quarter outlook increased to $135 billion from $129 billion.

But there was no change by the trade group in its prediction for purchase financing, which it expects to rise from $144 billion in the current quarter to $203 billion.

MBA has full-year production in its latest forecast falling from $1.222 trillion in 2015 to $1.170 trillion next year.

Last month,
overall originations were expected to climb from $1.203 trillion to $1.170 trillion in 2016.

The 2015 refinance outlook increased to $0.491 trillion from last month’s prediction of $0.471 trillion, while next year’s refinances are projected to total $0.379 trillion, no different than was expected in January’s outlook.

The association lifted the 2015 refinance forecast as it cut the expected average 30-year fixed rate by 20 basis points from last month to 4.2 percent for this year.

This year’s expected refinance share
is 40 percent, and the 2016 share is 32 percent.

Purchase production is expected to reach $0.731 trillion in 2015, a slight dip from $0.732 trillion projected in the last forecast. No change was made to 2016’s purchase forecast of $0.791 trillion.

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