Mortgage interest rates are likely to stay right near historic lows through the next two years, according to a recent forecast from the Mortgage Bankers Association, and mortgage loan origination will probably pick up as the unemployment rate improves.
The MBA in its October Economic and Mortgage Finance Commentary forecasted that interest rates on fixed rate loans will move upwards to about 3.8 percent by the end of the year, rising to 4.1 throughout 2013 and up to 4.5 in 2014. Even with a rising trend, those rates are bumping along the bottom compared with the past 60 years of mortgage history.
Those low rates are likely to help inspire people to refinance and buy homes, as long as the jobs market firms up. The MBA says that the unemployment rate will not move much from its current position at 8 percent until the middle of 2013. From there it should gradually decline to 7.4 percent by the end of 2014. While it’s nice to see that number going down, at that rate we are still looking at a long, drawn-out economic recovery.
Yet, the MBA says that the housing market will see better days sooner. Refinance loans should increase by 28 percent this year over 2011 and they are likely to rise by $760 billion next year and $360 billion in 2014 as interest rates rise.
Plus home purchase loans, although little changed in 2012 from last year, will jump up 16 percent in 2013, the MBA predicts, and will further rise 18 percent in 2014.
“This assumes that changes in the regulatory environment during 2013 are not unduly disruptive in terms of their constraints on available credit,” the MBA said in its commentary , “and FHA and/or Fannie Mae/Freddie Mac do not notably tighten their credit policies.”
What they mean is that these predictions are good as long as no new restrictive regulations are put on the mortgage industry, further choking off credit to mortgage seekers. Most likely though, banks will open up the funding spigots again when they feel the economy is safe enough to lend again.