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Is the mortgage market officially back in a refi boom?

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Mortgage lenders are operating in a refinance-dominated market again for the first time in years, but it may offer diminishing returns.

Refinances as a percentage of closed loans are above 50% for the first time since March 2015, according to Ellie Mae’s latest monthly report, which reflects October activity. That figure is up from 49% the previous month and 32% during the same month a year ago.

That’s in line with the Mortgage Bankers Association’s weekly application index, which has registered a refi share above 50% since late July. It’s also in line with the MBA’s quarterly estimate for the refinance share of originations, which is expected to rise to 51% in the fourth quarter from 38% in the third.

The recent gains in refinancing activity make MBA economist Joel Kan comfortable saying there has been a refi boom, wave, or boomlet this year.

But he noted that the current $800 billion estimate for this year’s refi volume is lower than the more than $1 trillion in such activity that took place in the previous booms that occurred in 2016 and 2012.

The 2019 refi boom also could be relatively short-lived because many borrowers have already been exposed to relatively low rates in recent years.

“We think the burnout this time is going to be a little bit faster than what we saw in 2012 and 2016,” said Kan, who is the MBA’s associate vice president of economic and industry forecasting.

By the first quarter of next year, the association expects the market to be purchase-dominated again with a 48% refi share. By year-end 2020, the MBA anticipates that refis will only represent 25% of quarterly originations.

“There is somewhat of a decline projected as we progress into the next few quarters,” Kan said.

But while quarterly projections suggest there will be a smooth, downward decline in refi share next year, short-term spikes in refinancing will probably occur along the way.

“We expect some swings in mortgage rates over the next few quarters just because of the uncertainty that’s out there in the market with investors responding to geopolitical uncertainty on trade, etc.,” said Kan. “So I think there will be pockets of refi activity that you might see come and go.”


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