“When rates go up refis will absolutely take a hit,” Tom Hutchens, senior vice president with Angel Oak Mortgage Solutions, told Mortgage Professional America.
When rates are expected to increase, however, is anyone’s guess.
“Recently, it’s been hard to predict when rates will go up,” Hutchens said. “It has seemed imminent before, but then some world calamity occurs.”
That market volatility has encouraged the Federal Reserve to maintain its benchmark rate, which has had an impact on mortgage rates.
However, many pundits are pointing to December or early 2016 as possibilities for the next Fed rate hike.
For now, refinances continue to be a major source of originator income.
According to the Mortgage Bankers Association’s weekly survey, refinance index increased 9% week-over-week for the week ending October 16.
Refinances currently account for 59.5% of total applications. However, that market share is expected to decrease next year, according to the MBA.
The association is predicting that segment will decrease by one-third year-over-year to $415 billion.
"Refinance activity will continue to decline as there are few remaining households that can benefit from an interest rate reduction and because rates will gradually begin to rise from historic lows in the coming years," Michael Fratantoni, MBA's chief economist, said in a recent release. "Home equity products may see an increase in demand as home prices continue to increase at a decelerating rate."
Originators have cashed in on a refi boom that has seen that segment make up more than 50% market share, but how much longer is that set to last?