S&P: Rising Interest Rates Likely ‘Won’t Disrupt’ U.S. Mortgage Volumes,Performance

S&P Global Ratings, New York, said it does not expect rising interest rates to disrupt mortgage volumes or performance in 2019.

The report, U.S. Residential Mortgage Finance 2019 Outlook, S&P predicts the following:

–Rising mortgage rates will be only a mild deterrent to purchase activity
in 2019.

–S&P expects flat year-over-year origination volume, with a shift to
purchase originations from refinancings.

–Non-qualified mortgage market expected to experience the largest
percentage growth.

–Millennials are entering the housing market, which should strengthen
housing demand across the U.S.

“We expect the relative effect of rising interest rates on housing affordability in the U.S. to become less pronounced in 2019, as home price growth moderates, wage growth continues and shifts in demographics drive growth in millennial home purchases,” S&P said. “Although housing finance reform remains in the news, the recent increase in the conforming loan limit hints at only a slight chance of change in 2019.”

The report noted the latter part of 2018 marked a turning point in the historically low interest rates and strong home price appreciation that prevailed over the past several years. “Mortgage rate increases became more pronounced (although they have recently subsided), but home prices started to cool in the latter part of the year relative to the 5%-7% annual HPA seen post-2014,” the report said. “We expect tempered HPA in 2019, with home purchase lending volume outpacing that in 2018 as mortgage refinancing activity falls with increased interest rates.”