Party Shrinks for Q4 Mortgage Revival
MBA still expects originations to start to rise from year-ago levels, but size of gain diminishes as high rates persist.
The Mortgage Bankers Association’s latest forecast released Monday shows the long slide in mortgage production is still expected to reverse with a fourth-quarter gain, but the gain is smaller than in previous monthly forecasts.
MBA’s mortgage and economic forecasts dated Sept. 18 lowered total originations by 5.4% from its Aug. 21 forecast with most of the drop coming from refinances. It now expects total originations in the fourth quarter will be 7.6% higher than a year earlier, instead of the 13.7% gain in its Aug. 21 forecast.
Purchase originations for the fourth quarter were lowered 3.5% to $358 billion. The revised amount is 5% higher than a year earlier.
Refinances for the fourth quarter were revised down 13% to $82 billion. The revised amount is 21% higher than a year earlier.
Other numbers in the report show a continuing of MBA’s pattern of revising as interest rates and inflation are higher than it expected. In the near term, the economy is also continuing to look better than previous forecasts as measured by gross domestic product, while MBA now expects a weaker performance in the second half of 2024.
Those trends have reflected the Fed’s rapid increase in interest rates since early 2022. CUNA and NAFCU economists said last week the Federal Open Market Committee is likely to hold rates at their current level at its next meeting, which ends Wednesday.
MBA had previously expected 30-year fixed-rate mortgages to fall from 6.2% Dec. 31 to 5% by the end of 2024 and 4.6% by the end of 2025. The new forecast doesn’t show mortgage rates falling below 5% within its horizon, which ends December 2025. The Sept. 18 forecast expects interest rates to end this year at 6.3%, next year at 5.4% and 2025 at 5.1%.
Joel Kan, MBA’s deputy chief economist, said Sept. 13 that mortgage applications after seasonal adjustments have fallen from the previous week’s level for seven of the past eight weeks, falling to their lowest level since 1996 for the week ending Sept. 8.
“Last week’s decline was driven by a 5% drop in refinance applications to the weakest reading since January 2023,” Kan said. “The 30-year fixed mortgage rate increased to 7.27% last week and was 40 basis points higher than where it was in late July.”
Purchase applications increased over the week despite the increase in rates, pushed higher by a 2%gain in conventional loans.
“Given how high rates are right now, there continues to be minimal refinance activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate,” Kan said.
The most recent data for credit unions is for the second quarter. NCUA data released Sept. 7 shows credit unions originated $25.7 billion in residential first mortgages in the second quarter, down 53% from a year earlier, while MBA shows originations by all lenders fell 34% to $463 billion.