A sharp drop in refinance demand is likely to result from rising interest rates in 2022, according to the Mortgage Bankers Association’s annual forecast.
Total mortgage origination is projected to drop 33% in the coming year, say MBA economists, though originations for the purpose of buying a home are expected to increase by a further 9% to reach a total of $1.73 trillion.
The average rate on the popular 30-year fixed loan will rise to 4%, a full percentage point higher than it is now, MBA economists say.
That will result in a 62% drop in refinance originations to just $860 billion. It deepens the anticipated 14% decline in 2021 to $2.26 trillion
“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,” said Michael Fratantoni, chief economist at the MBA.