SAN DIEGO — Fannie Mae is projecting interest rates will increase at a slower pace than the Mortgage Bankers Association, and that is why there is a wide variance in their respective forecasts for 2015 and 2016 industry originations.
The government-sponsored enterprise sees the average 30-year fixed mortgage rate rising only to 4.1% at the end of next year, said its chief economist Doug Duncan.
Meanwhile, MBA chief economist Mike Fratantoni predicts the 30-year fixed rate will rise to 4.8% at end of 2016.
Last week Fannie Mae projected volume of $1.7 trillion this year and $1.4 trillion next, Duncan said. MBA predicted volume of $1.45 trillion this year and $1.3 trillion in 2016 during its annual convention in San Diego on Tuesday.
Both forecasts call for growth in home purchase volume over the next few years, but the decline in refinance originations will be so steep that overall origination volume will decrease.
“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. Home equity products may see an increase in demand as home prices continue to increase at a decelerating rate,” Fratantoni said.
During a separate press briefing as well as a presentation to attendees, Fratantoni said he had become increasingly optimistic about the purchase market compared with earlier this year, as there has been a 4% gain in existing home sales and a 15% gain in new home sales this year.
Underlying the improved forecast is an expectation of 2% to 2.5% growth in gross domestic product annually between 2015 and 2018 plus robust job growth of 150,000 per month next year, he said. This would be down from 200,000 per month this year, but still strong enough to reduce unemployment to 4.8% by the end of next year.