The low rates should boost refi volume to $1.78 trillion this year which would be the highest level since 2003.

The cheapest home loan rates on record are heading lower, Fannie Mae said in a recent forecast. According to Fannie Mae, the annual average rate for 2020 will be 3.2%, down from 2019’s 3.9%. This would beat the record of 3.65% set in 2016, according to Freddie Mac data. Fannie Mae expects rates to drop to 2.9% in 2021. The rate forecast bodes well for housing demand and for refinancing volume, said Doug Duncan, Fannie Mae’s chief economist. “While housing took a big hit this quarter, we believe the further reduction of interest rates, persistently low levels of supply, and strong buyer sentiment compared to seller sentiment should continue to provide support to home prices and new construction,” Duncan said. The low rates probably will boost refi volume to $1.78 trillion this year, according to the forecast, which would be the highest level since 2003, when it was $2.5 trillion. “We also expect the extremely low rate environment to contribute to historically high levels of refinancing activity as household balance sheets and incomes improve,” Duncan said. Refinancings will support the U.S. economy because lower monthly housing bills will put more money in the pockets of consumers. At the end of May, almost 14 million owners had a “refi incentive,” meaning a difference of at least 0.75% between their existing loan and current rates, according to Black Knight. That represents savings of about $3.95 billion per month, money that likely would go into supporting the consumer spending that accounts for about 70% of the U.S. economy.

Source: HousingWire