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Mortgage

Refinancings may hit a 7-year high

Low rates will drive refi demand from homeowners who still have jobs

Mortgage originations for refinancings may hit a seven-year high this quarter as Americans chase the lowest home-loan rates ever recorded.

Refi volume probably will total $429 billion, more than double the $180 billion of the year-ago quarter, according to a Fannie Mae forecast.

Mortgage holders who aren’t among the more than 30 million people who have lost jobs during the pandemic will be eager to lock rates that are the lowest ever recorded, said Keith Gumbinger, a vice president at HSH Associates, a mortgage research firm.

While rates have bumped around in recent days, they’re still near the all-time low set last week that broke the old record set in early March, Gumbinger said.

Many homeowners are sitting on an equity cushion after several years of hefty home-price gains that will help them meet stricter standards being imposed by lenders, he said. The median price of an existing home rose 8% year-over-year to $280,600 in March, the National Association of Realtors said last month.

“We keep touching these record lows, and for folks who are reasonably well aligned with changing underwriting standards, there’s a good opportunity here to free up some cash,” Gumbinger said.

Much of that cash will go to the consumer spending that typically accounts for about 70% of GDP, he said. Even with half the nation still under strict lockdowns to stem the spread of coronavirus, there are still plenty of opportunities to spend the extra money, supporting businesses, he said.

“If someone saves a few hundred dollars a month by locking in at a lower rate, that’s money that’s typically spent into the economy, supporting economic growth,” Gumbinger said.

Looking at home purchases, mortgage volume probably hit a two-year low of $261 billion in the first quarter, and will likely rise to $271 billion in the current period as states begin lifting lockdown orders, according to the Fannie Mae forecast.

For the year, refinancing volume probably will total $1.4 trillion, the highest since 2012, according to Fannie Mae. Origination volume for purchase mortgages likely will total $1.1 trillion, the lowest since 2016, the forecast said.

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