The Mortgage Bankers Association has lowered it’s outlook for mortgages and refinances for the remainder of this year and next, as it also reported the fifth consecutive drop in its Weekly Mortgage Applications Survey.
According to the MBA, the number of applications for the week ending April 8 was 1.3 percent lower than the previous week. The Refinance Index decreased 5 percent from the previous week and was 62 percent lower than the same week one year earlier.
“Mortgage rates across all loan types continued to move higher, with the 30-year fixed rate exceeding the 5-percent mark at 5.13 percent—the highest since November 2018. Refinance activity as a result declined to the slowest weekly pace since 2019,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Higher rates are increasing borrower interest in ARMs. Their share of applications last week was at 7.4 percent, which was the highest share since June 2019. In a promising sign of strong purchase demand amidst affordability challenges, both conventional and government purchase applications increased.”
With rapidly rising rates, the MBA lowered its forecast for both refinance and purchase originations for 2022 and 2023.
The MBA’s April 2022 forecast now calls for mortgage originations to total $2.58 trillion in 2022—a 35.5 percent decline from 2021. Purchase originations are still forecasted to reach a record $1.72 trillion this year, up 4 percent increase from 2021.
Refinance originations are now expected to fall 64 percent to $841 billion.
“Mortgage rates have spiked more than 1.5 percentage points thus far in 2022. This rapid increase in rates, caused by a much more rapid pace of rate hikes and balance sheet reduction from the Federal Reserve, is in response to the booming job market and inflation being at a 40-year high,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “The jump in mortgage rates will slow the housing market and further reduce refinance demand the rest of this year. Higher home prices and rates as well as ongoing supply constraints are now expected to lead to an annual decline in existing home sales.
“However, MBA continues to expect purchase originations to reach a new record in 2022,” Fratantoni continued. “Even though existing sales volume will be slightly lower than last year, the continued growth in new home sales and the swift rise in home prices should deliver a smaller, but solid, 4 percent annual growth in purchase origination volume.”