Low Interest Rates Spur Mortgage Activity

While declining yields on long-term bonds are certainly putting some pressure on Wall Street, low rates are motivating people to refinance mortgages and buy new homes.

Mortgage volumes could be up as much as 20 to 25% from the initial estimates at year’s beginning. Initially valued at 1.380 trillion, the Mortgage Bankers Association has increased its estimate for new mortgages in its May report to 1.608 trillion, expecting to raise it again in July. Some firms are feeling even more optimistic. J.P. Morgan and Chase Co., the nations second largest mortgage lender by origination volume, says volumes could shoot up by as much as 50%. 

Along with an estimated increase in total mortgage volume, refinancing activity is also expected to rise. The Mortgage Bankers Association also increased their estimates for the share of refinancing activity to 40%, up from 33% in their initial January estimates. 

For banks, any increase in mortgage activity is more than welcome, especially in a time where lower rates are bottlenecking profits for lenders across the country. On the flip side, these lower rates are incentivizing borrowers to push for lower interest rates on loans, resulting in lower monthly payments. 

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Written by Front Street Intern Rex Warner.