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MBA predicts double-digit growth for new mortgage lending

But refis will pull total originations down

The Mortgage Bankers Association announced at the MBA annual conference in Boston that originations will see a double-digit increase in mortgage origination next year.

The purchase mortgage origination market, the MBA predicts, will increase 11% next year to $1.1 trillion.

The prediction for refinances, on the other hand, goes the opposite direction, and will decrease by 40% to $529 billion.

“We are projecting that home purchase originations will increase further in 2017, building on an estimated 10% increase in 2016,” said Michael Fratantoni, MBA chief economist and senior vice president of research and industry technology.

“Strong household formation coupled with further job growth, rising wages and continuing home price appreciation will drive strong growth in purchase originations in the coming years,” Fratantoni said.

Because of this, mortgage originations will actually decrease to a total of $1.63 trillion in 2017, down from $1.89 trillion in 2016.

In 2018, the MBA predicts the trend will continue as purchase originations will slightly increase more, to $1.18 trillion, and refinance originations will decrease to $410 billion for a total of $1.59 trillion.

“We expect that overall economic growth will be in a range of 1.5% to 2% over the next three years – not robust, but strong enough to lead to further job and wage growth,” Fratantoni said. “While inflation is still moderate, it is rising, and with job market close to full employment we expect the Federal Reserve will raise rates again at the end of 2016.”

“Rate increases through 2017 and 2018 will likely be gradual as Chair Yellen and the Fed have indicated that they are going to be cautious going forward,” he said. “Historically low, and in some cases negative, rates around the world continue to put downward pressure on longer-term U.S. rates, keeping them lower than the domestic growth environment would otherwise warrant.”

The MBA's call on originations falls in line with other predictions, notably this one from Freddie Mac.

Finally, the MBA’s forecast that the economy will continue to grow by about 125,000 jobs per month in 2017. This is down from the average 180,000 per month this year.


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