“Obviously people are refinancing right now because rates are at historical lows,” Craig Warner, a branch manager with Bank of England Mortgage, told Mortgage Professional America. “As long as the Fed keeps the rates low it will continue to be a strong source of business.”
The Mortgage Bankers Association’s refinance index increased 17% over the previous week, with the refinance share of mortgage activity increasing to 58.7% of total application for the week ending August 28.
That uptick in refi business is due to the record-low rate environment that many expect to continue for the foreseeable future, say mortgage professionals
There have been signs of a slowing global economy, which has many predicting the Fed will hold off on hiking its key interest rate at its next meeting on September 16-17.
Still, some anticipate at least one rate increase this year.
“We do expect a rate increase this year. The Fed is itching to start to get off zero interest rates, so they will move this year,” Jim McDonald, chief investment strategist at asset manager Northern Trust, told the Economic Times. “They are nervous that they don't have any dry powder to deal with an increase in financial markets or economic volatility. They can't really cut rates any more and the market would respond negatively to (more) quantitative easing. They want to get rates up, so that in the future, if they want to cut rates, they have that option.”
For its part, the IMF is urging the Fed to hold off on raising its rate.
"Monetary policy must stay accommodative to prevent real interest rates from rising prematurely," according to CNN citing an IMF statement.
Originators have been enjoying a great deal of refi business this year, and just how long that trend will last will be revealed at the next Fed meeting later this month, say industry players.