The Mortgage Bankers Association is sticking by its forecast that overall numbers of housing finance loans made in 2014 will decline 32% from this year.
That would mean that credit union and other housing finance lenders will have to compete for a piece of a significantly smaller mortgage market.
The association also forecast the numbers of purchase money loans – new mortgage loans as opposed to refinance loans – will rise by 9%, but acknowledged there will be a significant gap in mortgage originations next year over this year.
“We expect mortgage rates will increase above 5% in 2014 and then increase further to 5.5% by the end of 2015,” said the MBA’s chief economist, Jay Brinkmann.
“As a result, mortgage refinancing will continue to drop, and borrowers seeking to tap the equity in their homes will be more likely to rely on home equity seconds rather than cash-out refinances,” Brinkman said.
“We will potentially see a small increase in refinances toward the end of 2015 as the Home Affordable Refinance Program 2.0 expires but HARP activity during 2014 will still be low,” he added.
The association also stuck by its optimistic economic projections, though Brinkmann did not mention what might happen to the forecast if U.S. spending and taxation debates are not resolved.
“Our forecast for the increase in the purchase market is based on our expectations for ongoing improvements in the broader economy and the jobs market. We are projecting overall economic growth to be 2.4% in 2014 and 2.7% in 2015, supported mainly by increases in consumer spending and residential fixed investment,” Brinkmann said.
“GDP growth will remain relatively weak through the end of 2013 and early 2014, at around 2%, due to a variety of uncertainties, particularly over US spending and tax policies linked to the debt limit debate. Our expectation is that the economy will grow somewhat faster in the second half of 2014 as some of these issues are resolved,” the MBA economist said.