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While the recent Brexit vote has created political and economic uncertainty in Europe, it appears to have created an unexpected result on this side of the Atlantic: A new wave of mortgage refinancing.
In its latest Forecast Commentary, the Mortgage Bankers Association (MBA) is predicting a boom in refinance activity thanks to the financial market tumult sparked by Brexit. The trade group has boosted its 2016 refinance originations forecast to $760 billion, up from $690 billion in its June forecast, and has reversed its earlier belief that this year’s refinance activity will be less than the 2015 level.
“Mortgage rates have been low for years by historical standards, but the impact of Brexit has brought us close to record lows again, and for many borrowers who may not have been able to refinance previously or who are looking for even lower rates, this could be the necessary impetus to act,” the MBA stated. “Additionally, jumbo rates are at record lows (since we started collecting data in 2011), giving more borrowers with large loan balances great financial benefit by refinancing.”
The MBA also forecast that the Brexit-related upheaval could also encourage potential homeowners to come off that proverbial fence.
“Even though financial market volatility may be causing some anxiety, the combination of low rates and a still strong job market in the US outweighs those fears for these homebuyers,” the MBA added. “Overall origination volume for 2016 is expected to be $1.74 trillion compared to $1.63 trillion in 2015.”