"MBA has been projecting a rate increase all year and we have factored rising mortgage rates into our 2016 mortgage finance forecast,” Mike Fratantoni, MBA's Chief Economist and Senior Vice President for Research and Industry Technology said. “Due to the strength of the economy, we still project 10 percent growth in the purchase market in 2016, despite gradually increasing rates.”
The MBA is echoing originator sentiment and predicting a decrease in refinance business next year, however.
"Overall, mortgage origination volume will be down next year due to a reduction in refinances, but the positive impact of the improving economy on home purchases will offset the reduction,” Fratantoni said. “From a mortgage market perspective, as we move forward, it will also be important to carefully monitor the Fed's plans with respect to their balance sheet investment in MBS.”
The MBA agreed with the Fed that it was time to raise interest rates, noting unemployment rate at a healthy 5%, and core inflation running at 2%.
The Fed increased its benchmark for the overnight rate for the first time since 2006 last week.
“Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent,” the Fed said in a release. “The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.”
The market will continue to rebound next year, despite expected rate increases.