“2016 will be a very strong year for purchases even if rates rise; if they do rise, it won’t be significant,” Mark Fleming, chief economist for First American Mortgage Solutions, told Mortgage Professional America. “Economists have been forecasting rate increases over the last 2-3 years and it hasn’t happened; even with the Fed recently raising its rate, mortgage rates have actually gone down.”
Recently released stats support Fleming’s forecast.
Mortgage applications were up 8.8% week-over-week for the week ending January 22, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.
Applications are also up year-over-year. And that’s the more important indicator of just how strong the market currently is, according to Fleming.
“The biggest headline from MBA’s survey is that applications are up 22% year-over-year,” Fleming said.
That’s good news considering he believes refinance business will dwindle this year.
“I do expect refi rates to go down; if rates go up, refinances will drop,” Fleming said.
However, he argues increased rates won’t have the same impact on purchases.
“We survey title agents every quarter and, recently, they said it would take an increase of 5.1% (on a 30-year fixed-rate mortgage) to discourage first-time buyers,” Fleming said.
And rates have a long way to go to pass the 5% mark.
According to MBA’s most recent survey, 30-year fixed-rate mortgages for conforming loans currently sits at 4.02%.
The average rate for jumbo 30-year fixed-rate loans sits at 3.89%.
Originators have reason for optimism this year, according to one economist who is forecasting strong business prospects.