Bankers: Refinance Share of New Mortgages Down to 45% by 4Q

Bankers: Refinance Share of New Mortgages Down to 45% by 4QBy the end of the year, the refinance share of mortgage originations should be at 45 percent, plummeting from a 74 percent share in the first quarter of this year.
That’s the toll higher mortgage rates is taking on refinancing.
The Mortgage Bankers Association expects loan originations in the second half of the year to total $606 billion, up from the $527 billion it had forecast at the beginning of the year.
But that’s down sharply from the estimated $976 billion in originations during the first half of the year. And about 75 percent of those originations were tied to refinancing applications on one- to four-family residences.
The jump in the forecast is due almost entirely to carryover refinance loans originated during the second quarter that will close in the third quarter.
Purchase loan originations during the second half of the year are expected to total $312 billion, compared to $299 billion originally forecast.
The refinance share in the third quarter is forecast at 51 percent and projects to drop to 45 percent by the fourth quarter.
Mortgage rates have climbed up to near 4.5 percent in recent week following Federal Reserve statements regarding the beginning of the end of its stimulus program to bolster the economy. Rate increase have eased this month as the Fed has indicated more cautious steps.
The MBA expects the purchase mortgage rate as reported in the Freddie Mac weekly survey to average 4.4 percent during the third quarter and 4.7 percent during the fourth quarter, about 20 to 30 basis points higher than was forecast at the beginning of the year.
“As we said at the beginning of the year, the big unknown for origination volumes was the timing of the market reaction to any statements from Federal Reserve officials regarding the phasing out of quantitative easing and the impact on refinance volumes,” said Jay Brinkmann, MBA’s chief economist. “While the magnitude of the rate increase was larger than we had forecast, the timing of the increase and the impact on refinance volumes was pretty much in line with what we had expected.”
Read the MBA’s full forecast.

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