Rising interest rates will lead to a sharp decline in refinancing demand in 2022, it will result in a lot less business to mortgage bankers, as per the Mortgage Bankers Association’s latest annual forecast. It predicts that total origination volume will decline 33% to $2.59 trillion.
The average interest rate on the famous 30-year fixed loan will increase to 4%, a full percentage point more than what it is currently, MBA economists report.
That will lead to a 62% decrease in refinance originations. It deepens the expected 14% decrease in 2021 to $2.26 trillion.
Michael Fratantoni, Chief Economist at the MBA said, “The economy and labor market rebounded in 2021, but overall growth fell short of expectations because of stubborn supply chain issues that fueled faster inflation, slowed consumer spending, and presented challenges in filling the record number of job openings available.”
He added, “With inflation elevated and the unemployment rate dropping fast, the Federal Reserve will begin to taper its asset purchases by the end of this year and will raise short-term rates by the end of 2022.”
However, the applications for buying a home are predicted to increase by 9% to a record high of $1.73 trillion in 2022.
Overall, this will mark a shift from the record-high production profits of 2020, to record lows. The drop will increase the competition among lenders.
