Mortgage demand will feel the brunt of rising rates this year, as buying a home is becoming more expensive. Mortgage bankers are curving their expectations on mortgage originations from $2.61 trillion to $2.58 trillion in 2022.
Mortgage Demand To Plunge
As reported by CNBC, the Mortgage Bankers Association’s (MBA) estimate means that mortgage originations will have dropped by 35.5% by the end of this year from 2021. This includes refinancing loans.
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At present, the MBA groups over 2,000 firms in the business and its estimations paint a dire picture of the recovery of the U.S. economy. Housing prices have increased amid a tight market, while inflation has reached a fresh 40-year record.
The Federal Reserve has hiked interest rates to tackle skyrocketing prices, which has send refinancing on a sharp dive.
According to the MBA, refinancing applications during the first week of April were 62% lower than they were the previous year, and they are expected to fall by 64% for the full year.
“The refinance share of mortgage activity decreased to 37.1% of total applications last week from 38.8% the previous week,” CNBC reports.
Purchase Origination
Still, originations for purchases are expected to jump to a record $1.72 trillion on 2022, down from a previous estimate of $1.77 trillion.
Michael Fratantoni, MBA’s chief economist, said, “Even though existing sales volume will be slightly lower than last year, the continued growth in new home sales and the rapid rise in home prices should deliver a smaller, but solid, 4% annual growth in purchase origination volume.”
“Mortgage rates across all loan types continued to move higher, with the 30-year fixed rate exceeding the 5% mark —the highest since November 2018. Refinance activity as a result declined to the slowest weekly pace since 2019,” said Joel Kan, an MBA economist.
For the first week of April, mortgage demand grew via a 1% increase in applications but was still 6% lower than the same week last year.
“In a promising sign of strong purchase demand amidst affordability challenges, both conventional and government purchase applications increased,” Kan said.
