The country’s mortgage bankers are slashing their expectations for this year as rapidly rising rates make home buying more expensive.
The Mortgage Bankers Association is now calling for total mortgage creation, including loan refinancing, to total $2.58 trillion in 2022, down 35.5% from 2021. Previous forecasts were $2.61 trillion.
Forecasts from the MBA, which represent more than 2,000 companies in the industry, reflect contradictory realities about the US economy. Supply in the housing market is scarce and prices are high. Americans are grappling with the hottest inflation in four decades, while the Federal Reserve aggressively raises interest rates to keep it in check.
With the rise in interest rates, the demand for refinancing has fallen sharply recently. Home loan refinancing requests fell 5% over the last week, seasonally adjusted, and were 62% lower than they were a year ago, according to the MBA. For the full year, the group expects refinancing to decline 64%. The share of mortgage refinancing activity decreased to 37.1% of total applications last week from 38.8% in the previous week.
Procurement revenue is still expected to rise to $1.72 trillion this year, but the previous forecast was $1.77 trillion.
Michael Fratantoni said: “Although current sales volume will be slightly lower than last year, continued growth in new home sales and rapidly rising home prices should result in lower, but strong, 4% annual growth in home purchase volume. ‘, Senior Economist, MBA.
The average contract interest rate for 30-year fixed-rate mortgages with a 20% down payment and matching loan balances of $647,200 or less rose to 5.13% from 4.90%, according to the MBA. The rate was 3.27% in the same week a year ago.
Points increased to 0.63 from 0.53, including creation fees.
“Mortgage rates across all loan types continued to rise, with the 30-year fixed rate exceeding the 5% mark – the highest rate since November 2018. Refinancing activity as a result declined to the slowest weekly pace since 2019,” said Joel Kahn. MBA Economics.
Mortgage applications to buy a home rose 1% during the week but were 6% lower than the same week a year ago. More potential buyers are now turning to adjustable rate mortgages, which carry lower interest rates. Their share of orders last week was 7.4%, the highest since June 2019.
“In a promising sign of strong purchasing demand amid affordability challenges, traditional and government procurement applications have increased,” Kahn said.