The Mortgage Bankers Association raised its 2012 forecast for residential originations on Thursday, citing low interest rates that have sparked a massive increase in refinance activity.
The higher projection is "due entirely to an increase in refinances," while home purchase volume is expected to dip slightly this year, the MBA said in a statement. The MBA's new projection of $1.28 trillion is up just slightly from $1.26 trillion in 2011.
Purchase estimates were revised downwards to reflect "lower than previously expected home prices and weaker than previously expected home sales," the MBA said.
Mortgage lenders rely on the MBA's projections to determine staffing levels and to plan their own budgets for the year ahead. Refinance originations are now expected to total $870 billion in 2012, almost identical to 2011. The forecast for home purchases dropped to $409 billion from $415 billion.
Mike Fratantoni, the MBA's Vice President of Research, says market turmoil in Europe have driven interest rates below 4% resulting in a flurry of refinancings.
"We are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result," he says.
