The Mortgage Bankers Association today significantly lowered its 2009 mortgage origination forecast to 2.03 trillion, a drop of $700 million below its March projection. The primary reason: higher interest rates. Interest rates climbed from 5.19 on March 25 to 5.76 on June 17, according to Bankrate.com.
Rising interest rates have put a serious damper on refinancing.
“The March increase in refinance origination was driven by two factors,” Jay Brinkmann, the group’s chief economist said in a prepared statement. “The subsequent increase in interest rates, however, began to choke off the refinance wave in May, much earlier than expected in the March forecast.”
Brinkmann said another reason the group lowered the forecast was the weak response so far to the Home Affordable Refinance Program being overseen by Fannie Mae and Freddie Mac. The Obama administration said in March that it expected 1.5 million to 2 million borrowers to take advantage of the program, which is designed to help borrowers who are current on their payments to refinance up to 105% of a home’s value. But only 13,000 loans have been refinanced through the program, although Brinkmann said he expects the numbers to rise over time.
Interestingly, the MBA is forecasting that interest rates will rise through the end of the year and through 2010. Other analysts say they expect interest rates to fall.