MBANow: MBA Chief Economist Mike Fratantoni on Rising Interest Rates

The Mortgage Bankers Association released a new video featuring MBA Chief Economist Mike Fratantoni, who discusses rising interest rates and how that could impact the real estate finance industry going forward.  

The video can be downloaded at https://www.youtube.com/watch?v=Z7hM4Qb4YAM&feature=em-uploademail.  

Fratantoni noted just over the past month, 10-year Treasury rates have moved by 30 basis points, which he called “a phenomenal move in a short period.”  

“The global economy has really turned,” Fratantoni said. “We’re seeing every part of the world really pick up the pace of growth, and expectations that central banks around the world are going to increase rates as well. In the U.S., job market is strong; inflation appears to be picking up even though it’s still low; and I think many investors now expect the pace of Fed hikes is going to increase through the course of 2018.”  

Fratantoni said for the residential real estate finance industry, the pickup in rates over the past year has resulted in a fall-off in refinance volume, from 50 percent of mortgage originations in 2016 to 33 percent in 2017 and an anticipated 25 percent in 2018. “For those lenders that really focused on refi, it’s been a tough couple of years,” he said.  

Conversely, lenders who have focused on purchase originations have seen growth, which should continue to grow by 7 percent through 2018. “With declining volumes we’ve seen a fairly abrupt shrinkage in margins, so regardless of which channel lenders are operating, but particularly for third-party channels like correspondent or broker, we’ve seen tightening margins,” Fratantoni said.  

Other videos in the MBANow series can be viewed at the MBANow website: https://www.mba.org/get-involved/stay-connected/mba-now.