“It will only take a 25 to 50 basis point increase in mortgage rates to dramatically cut off refi demand,” said Mike Fratantoni, MBA’s vice president of research and economics.
The trade group’s latest forecast shows that refinancings could drop to $93 billion in the fourth quarter of 2013 and from $388 billion in the current fourth quarter.
HARP refinancings are currently running at 20% to 25% of refis. In 2013, HARP refis are “going to start dipping below 20% and by the second half it will be falling off as well,” Fratantoni told NMN. (The HARP program is slated to expire at yearend 2013.)
Meanwhile, purchase mortgage originations could exceed refis by next summer.
MBA’s forecast calls for $156 billion in mortgage purchase transactions in the third quarter of 2013, compared to $132 billion in refis.
Rising home prices and sales will lead to $585 billion in purchase originations in 2013, compared to $499 billion this year.
Despite the 20% increase in purchase mortgage activity, it won’t be enough to shelter the industry from the drop-off in refis.
Overall, MBA’s economists are on the pessimistic side compared to many mainstream forecasters. They expect the final tally for 2012 originations will be $1.75 trillion. Next year, it could fall 23% to $1.34 trillion, according to their forecast.