As 2015 enters its final stretch this week, various mortgage groups have been casting their predictions for the housing market in 2016, the latest of which come from Freddie Mac’s Insight & Outlook for December and the year ahead.

Freddie Mac reviews the likely impact of the Federal Reserve’s long-awaited decision to raise short-term interest rates on housing in 2016, offering five market predictions on where mortgage rates and interest rates are headed, home sales expectations, as well as home purchases and housing starts over the coming year.

Here are Freddie Mac’s five predictions for housing in 2016:

• Expect the 30-year fixed-rate mortgage to average below 4.5% for 2016 on an annualized basis.
• Gradually higher mortgage interest rates will present an affordability challenge, but expect a strengthening labor market and pent-up demand to carry 2015’s home sales momentum into 2016.
• Expect house price growth to moderate a bit to 4.4% in 2016 driven in part by the reduction in homebuyer affordability and reduced demand as a result of Fed tightening.
• Housing activity will grow in 2016 despite monetary tightening. Expect housing starts to increase 16% year-over-year and total home sales to increase 3%.
• While home purchases will increase next year, higher interest rates will reduce the refinance volume pushing overall mortgage originations lower in 2016 than in 2015.

Also of note in Freddie Mac’s Insight & Outlook for December, Chief Economist Sean Becketti highlighted the growing phenomenon of marketplace lending.

Marketplace lenders are non-banks that provide one or more types of consumer loans. Mostly Internet-based, many lenders rely on peer-to-peer lending, often offering niche products such as debt consolidation and student loan financing, though some marketplace lenders have ventured into auto and even mortgage loans.

Though currently small with less than $20 billion in originations this year, marketplace lending is growing rapidly and challenging the traditional banking model, especially among Millennials.

PricewaterhouseCoopers LLP estimates that peer-to-peer originations totaled approximately $5.5 billion in 2014 and projects the market could reach $150 billion by 2025, according to the Insights & Outlook report. Meanwhile, Morgan Stanley estimates marketplace lending mortgage could total $14 billion by 2020, but this would still represent less than 1% of industry originations.

It’s too soon, however, to tell whether marketplace lending will disrupt the norm to Uber proportions, or if it is just another flash in the pan, Becketti noted.

“The cost advantages of marketplace lending may not extend to mortgage lending,” Becketti said. “But innovation is difficult to stop. New startups will look for ways to improve upon the current marketplace lending business models. Large bank lenders may incorporate the most successful of the marketplace lending innovations. It’s difficult to say where all this will lead, but one prediction is indisputable. Expect change.”

Written by Jason Oliva