Please ensure Javascript is enabled for purposes of website accessibility

Key Bankers' Group Predicts 2020 Surge in Mortgage Refinances

By John Bromels - Mar 10, 2020 at 6:51PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As rates plummet on coronavirus fears, the Mortgage Bankers Association doubles its prior growth projections.

Coronavirus worries have hit the world economy hard. U.S. stocks have plunged as supply chain and travel disruptions continue across the globe. However, some of the fallout is having a positive impact in an unlikely place: the mortgage industry. 

On Tuesday, the Mortgage Bankers Association, an industry trade group, said it now expects a 36.7% year-over-year gain in mortgage refinances in 2020. It's also projecting total mortgage originations to jump by 20.3% from 2019's levels; the group had been projecting an 8.3% decrease. That could benefit top U.S. mortgage lenders like Wells Fargo (WFC 5.16%) and JP MorganChase (JPM 6.19%).

A woman holding a small model house works on a calculator with charts underneath it.

Mortgage originations are now expected to rise in 2020, led by a boom in refinancing. Image source: Getty Images.

Historic lows

Mortgage rates have been trending lower since November 2018, when they peaked at 4.94%. Following an emergency Federal Reserve rate cut on Feb. 3 in response to coronavirus concerns, the benchmark 30-year fixed mortgage rate hit 3.29%. That's the lowest rate since recording began nearly 50 years ago.

News of the historically low rate caused refinance applications to surge by 224%, according to government mortgage lender Freddie Mac. Mortgage bankers have been scrambling to process the flood of new applications.

While mortgage rates don't directly track the Fed's benchmark interest rates, they often move in tandem. With the Fed expected to announce further rate cuts later this year because of the coronavirus' impact on the economy, mortgage rates may fall even further, leading to even more applications for refinancing.

A housing boom

The Mortgage Bankers Association also had good news for residential homebuilders like D.R. Horton (DHI -1.91%) and NVR (NVR -1.20%), which have their own mortgage banking arms. Overall purchase originations -- which include new home purchases -- are expected to rise 8.3% in 2020, to $1.38 trillion. That's a 4.5% increase over the group's prior forecast of $1.32 trillion. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$124.60 (6.19%) $7.26
Wells Fargo & Company Stock Quote
Wells Fargo & Company
$43.82 (5.16%) $2.15
D.R. Horton, Inc. Stock Quote
D.R. Horton, Inc.
$67.44 (-1.91%) $-1.31
NVR, Inc. Stock Quote
NVR, Inc.
$4,211.33 (-1.20%) $-51.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.