Residential Lending Forecast 2019 & 2020 as of May 2019

Interest rates make up part of the throttle linkage for residential lending.  Shown in the table is the latest forecast for 30-year conventional mortgage rates as reported by Fannie Mae, Freddie Mac and the Mortgage Bankers Association.  None see residential mortgage rates exceeding 4.6 percent between now and 2021 on an annualized basis.  The 30-year conventional mortgage rate averaged 5.24 percent weekly since 2000, peaked at 8.64 percent the seven days ending May 18, 2000 and bottomed at 3.31 percent the seven days ending November 21, 2012.  The median weekly interest rate since 2000 was 5.04 percent, with the rate for the seven days ending May 16, 2019 at 4.07 percent.

The following figure shows the monthly average of the weekly Primary Mortgage Market Survey from Freddie Mac, with the 30-year, fixed-rate conventional averaging 4.13 percent in the past four weeks.

Declining rates thus far this year have resulted in an increase in the forecast for refinance lending volume in 2019, rising from $474.0 billion in 2018 to $492.7.0 billion in 2019.  With rising rates in 2020, refinance volume is expected to drop by 12.6 percent to $430.7 billion in 2020.  The all-time record refinance lending volume was reached in 2003 at $2.598 trillion.

Residential purchase lending volumes are expected to rise moderately both this year and next.  Current forecast is for $1.197 trillion in purchase lending in 2019 (up 2.8 percent) and another 4.0 percent gain in 2020.

Total residential lending volume (purchase plus refi) is now expected to rise 3.1 percent in 2019 driven by both growing purchase and refinance activity.    Rising rates in 2020, however, call for a decline in total lending by 0.8 percent as refinance activity retracts.

From a long-term perspective, interest rates remain very  affordable.  Countering that, however, are increasing home prices dampering sales.


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