Magazine article Mortgage Banking

MBA Increases 2004 Origination Forecast to $2.5 Trillion

Magazine article Mortgage Banking

MBA Increases 2004 Origination Forecast to $2.5 Trillion

Article excerpt

THE MORTGAGE BANKERS ASSOCIATION (MBA) has revised its 2004 forecast for loan originations to $2.5 trillion, up from the $2 trillion previously forecast in January. The reason for the increase is a continued low-interest-rate environment that will result in a record high loan origination market for home purchases and a refinance market that is surprisingly strong following the record set in 2003.

"Despite the strong pace of the economic recovery, interest rates have remained low for a variety of reasons. Some borrowers are responding to these rates by purchasing homes, and others are making up for missed opportunities to refinance," said Doug Duncan, MBA's senior vice president and chief economist.

MBA expects mortgages for home purchases will make up 54 percent of total originations, or $1.4 trillion. Refinancings, which have been boosted by falling interest rates, will post $1.1 trillion in originations. These numbers are up from the $1.1 trillion for total originations and $700 billion for refinancings previously forecast by MBA. In the revised forecast, refinancings will comprise 46 percent of originations in 2004. In comparison, refinancings in the only two years with originations higher than 2004 were 66 percent in 2003 and 62 percent in 2002. Adjustablerate mortgages (ARMs) make up 29 percent of the total $2.5 trillion forecast.

The key driver of the new forecast is MBA's revised outlook on interest rates. MBA now projects that the 10-year Treasury rate will average only 3. …

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