Mortgage bankers see weak demand as today's mortgage rates rise again

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The trade group representing the nation's mortgage bankers says demand for mortgages will be slack in the coming months as the refinancing wave subsides. Mortgage rates, they say, will also rise from today's low levels, but maybe not by all that much.

The Mortgage Bankers Association (MBA) forecast yesterday that mortgage originations would decline by 25% in 2012, from $1.2 trillion this year to $900 billion next year. A drop in demand for refinancings will account for all of the fall, the group says, as it predicts that new purchase loan volume will rise slightly next year.

MBA Chief Economist and Senior Vice President for Research and Education Jay Brinkman said that while the group expects consumer spending and business investment in plant and equipment to keep the US out of recession next year, there remains much uncertainty to that call. “However, the uncertainty is not one-sided," he added. "We also see a path for the economy that could lead to above trend growth in 2012. Housing inventory and shadow inventory is declining steadily. A more robust housing market recovery could spur faster overall growth. The odds of this scenario, however, are low and we think the most likely outcome is another year of frustratingly slow economic growth and stubbornly high unemployment.”

As for which way mortgage rates will go, Brinkman said, “We expect that mortgage rates are at or near their low points, but we have been wrong on this call before. Our rate forecast assumes that the Fed maintains short-term rates near zero for the next two years, and also assumes that mortgage-Treasury spreads remain wide, given the current supply and demand imbalance in the market. If the economy tips into recession, rates would stay lower for longer, but we do not anticipate they would drop significantly. If the economy recovers more quickly, even with the Fed’s Operation Twist, longer-term rates could rise faster.”

Today's mortgage rates jump up from week-ago levels on overnight surveys

For now, mortgage rates appear to be retreating from their recent historic lows already, based on movements on the major overnight surveys. While day-to-day movements were higher on Bankrate and steady or lower on Zillow, both surveys showed double-digit gains in today's mortgage rates from the previous week.

This morning's average mortgage rates on the Bankrate.com overnight survey, with changes from yesterday and one week ago, are: 30-year fixed, 4.18% (+3 points, +18 points); 15-year fixed, 3.51% (+3 points, +14 points); 5-year ARM, 3.08% (+1 point, +9 points); 30-year fixed refinance loan, 4.28% (+2 points, +17 points).

Yesterday's average afternoon mortgage rates on the Zillow.com National Mortgage Marketplace, with changes from Monday and one week ago, are: 30-year fixed, 4% (unchanged, +25 points); 15-year fixed, 3.4% (-1 point, +22 points); 5-year ARM, 2.94% (-4 points, +23 points). Today's real-time rates as of 10 a.m., with changes from yesterday morning and afternoon, are: 30-year fixed, 4% (+3 points, unchanged); 15-year fixed, 3.4% (+7 points, unchanged); 5-year ARM, 2.86% (-4 points, -8 points).

One basis point equals one hundredth of a percentage point. Rates reported in this article assume good credit (FICO score of 650 or higher) and a 20% down payment. Morning rates from Zillow.com are for loans for the most creditworthy borrowers (FICO score of 720 or higher).

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