MBA doubles 2020 refinance forecast

The Mortgage Bankers Association (MBA) has revised its 2020 forecasts for mortgage activity and the economy, doubling its previous refinance originations projection for the year.

The massive upward revision comes courtesy of the current interest rate environment, with refi originations now expected to surge 36.7% year over year to $1.232 trillion, twice the organization’s previous forecast. That figure would represent the best refi volume since 2012, when $1.456 trillion in refinances were posted. The refinance share is now projected to grow to 47% in 2020, up from 41% last year.

As with the ongoing refi boom to date, low rates are behind the newly doubled projection. Two weeks ago, with Freddie Mac’s 30-year average at 3.45%, Black Knight reported that there were 11.1 million mortgage-holders with qualifying credit who could shed at least 0.75% off their current lien rate. With the 30-year average falling to a record low of 3.29% last week, the number of refi candidates grew to 12.8 million, the most on record.

Purchase originations are now predicted to increase to $1.377 trillion, an 8.3% gain from last year, bring total mortgage originations to around $2.609 trillion. That would be a 20.1% rise from 2019’s total volume of $2.17 trillion. It would be an impressive increase, considering that last year saw originations swell to their highest level in over a decade.

“Lower rates have led us to estimate significantly higher mortgage refinance volume, and we now anticipate an increase in refinancing in 2020, compared to the previously forecasted decline,” said Mike Fratantoni, chief economist for the MBA.

That projected decline was initially predicated on mortgage rates starting to plateau. But with trepidation over the financial fallout from coronavirus keeping interest rates, including mortgage rates, firmly trending down, refinancing will be an attractive option for more homeowners as the year goes on.

Currently, the MBA expects mortgage rates to hover around 3.3% in the second and third quarters before inching upward to 3.4% at the end of the year. That would translate into $838 billion in mortgage originations during the typically strong second quarter buying period, with another $724 billion during the third. Combined, that’s $1.562 trillion — almost as much as the volume for all of 2018. Refinance volume for those two middle quarters is anticipated at a total of $780 billion, more than 1.8 times the volume during the same six months last year.


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