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MBA forecast spots slow recovery

October 30, 2002

Moderate economic growth is expected to slow mortgage market in 2003

The Mortgage Bankers Association of America's annual economic forecast for 2003 expects a gradual improvement of the current economy leading to modest increases in mortgage rates over the next 18 months.

The predicted increases in mortgages will most likely slow loan originations to approximately $1.57 trillion, according to the forecast.

"Mortgage rates are poised to increase gradually as economic activity picks up next year," said MBA Chief Economist Doug Duncan. "This will slow mortgage funding activity over the course of next year, but in the end, 2003 will likely be the third highest volume production year on record."

Duncan expects the final volume of loans in 2002 to approach $2.42 trillion.

While technology has helped to limit the incidence of bottlenecking, MBA expects that this and low rates will cause spill over of this year's refinance volume into the first half of next year. Mortgage rates for 30-year loans will average 6.5 percent before ending the year in the 6.8-7 percent range. MBA expects this to gradually slow home purchase activity in the second half of the year.

MBA predicts that consumer spending will most likely slow in response to the losses associated with declines in equity prices and that business spending will remain weak, but that both effects are likely to wear off gradually next year.

Washington, D.C.-based MBA is the national association representing the real estate finance industry.

Source: MBA



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