March 10 (UPI) -- A drop in mortgage rates last month has caused a surge in mortgage refinances, the Mortgage Bankers Association said Tuesday, doubling its earlier 2020 refinance forecast.
The MBA is now forecasting total mortgage originations of $2.61 trillion this year, a 20.3 percent gain over last year's $2.17 trillion and an increase from last month's forecast of $1.99 trillion.
Driving the change are refinance originations, now expected to double earlier MBA projections to about $1.23 trillion, up 36.7 percent from last year.
"Last month' activity was the calm before the storm. Mortgage rates dropped steeply in the last week of February and a large surge of refinance activity followed," MBA's Associate Vice President of Economic and Industry Forecasting Joel Kan said in a statement Tuesday. "Investors may adjust their future mortgage credit offerings based on the sudden upswing in demand."
Lenders have been struggling to keep up with demand for refinances as the average 30-year fixed mortgage rate hit a record 3.29 percent last week, the lowest level in its nearly 50-year history, according to Freddie Mac, causing a 224 percent jump in annual refinance applications.
The surge in refinancing is not expected to end anytime soon since the Federal Reserve is expected to lower its interest rates in the next few months.
"We're going to have this initial rush, but even as rates rise, this refinance boom is going to be extended because the mortgage rates the borrowers see are going to stay extremely low," said MBA's Chief Economist Mike Fratantoni.
The Fed cut rates last week by half a percentage point amid financial concerns over the coronavirus outbreak.