Mortgage

Cheap rates will push 2019 mortgage volume past $2 trillion, Fannie Mae says

Trendline shows we may be heading toward a 12-year high in lending volume

Fannie Mae boosted its mortgage origination forecast past $2 trillion on Thursday, saying 2019 probably will be the best year since 2016.

Lenders likely will originate $2.04 trillion in home loans this year, Fannie Mae said, boosting its forecast 3.4% from its month-ago projection. The new estimate is just a few billion dollars shy of the $2.05 trillion lent in 2016.

But, the trendline shows an even bigger record might be cuing up. Fannie Mae has raised its lending forecast every month since April as mortgage rates tumbled. The average monthly hike has been 3.6%, according to HousingWire calculations. If November’s forecast sees a hike of just 0.7%, it would push 2019 past 2016’s level and make it the best year since the $2.31 trillion lent in 2007, according to Freddie Mac data.

Lenders are feeling it, according to Fannie Mae’s Mortgage Lender Sentiment Survey. Lender profitability sentiment hit a survey high in the third quarter even as credit standards shifted from net easing to net tightening, according to the forecast.

“Lenders attributed their upbeat profitability outlook to consumer demand, particularly for refinance mortgages, driven by declining interest rates,” the report said.

The new forecast boosted the refinancing share to 37% from the 35% it projected last month. The mortgage giant began the year, in its January forecast, predicting a 26% refinancing share. That month the average U.S. rate for a 30-year fixed mortgage was 4.46%, according to Freddie Mac. The rate was 3.61% in September after falling every month of the year.

“At the longer end of the curve we have seen some stabilization in mortgage rates,” the forecast said. “The 30-year fixed mortgage rate averaged 3.61 percent in September, only 1 basis point under August’s monthly average but more than a full percentage point below year-ago levels.”

New-home sales probably will total 675,000 in 2019, Fannie Mae said, boosting its forecast 1.3% from the 666,000 it called for last month. This month’s projection would put sales of new houses 9.4% above last year.

The new forecast also raised the estimate for 2019 existing home sales to 5.337 million from 5.324 million it called for last month. The new projection puts this year almost on par with 2018 – specifically, 3,000 fewer home sales than last year, a drop of 0.1%.

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