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“The current generation of marketplace lenders all may fail in the next economic downturn,” says Sean Becketti, Freddie Mac’s chief economist. “Regulators may impose higher standards on marketplace lenders. The cost advantages of marketplace lending may not extend to mortgage lending.”
But Becketti says the new year will undoubtedly bring changes: “Innovation is difficult to stop. New startups will look for ways to improve upon current marketplace lending business models. Large bank lenders may incorporate the most successful of the marketplace lending innovations. It’s difficult to say where all this will lead, but one prediction is indisputable. Expect change.”
Here are five more predictions for 2016 from the mortgage giant:
- The 30-year fixed-rate mortgage will likely average below 4.5 percent for 2016 on an annualized basis.
- Mortgage rates will gradually move higher posing an affordability challenge. But expect a strengthening labor market and pent-up demand to carry momentum into 2016.
- Home prices will likely moderate slightly to 4.4 percent in 2016, driven in part by the reduction in home buyer affordability and reduced demand as a result of Fed tightening.
- But industry activity will grow in 2016 despite monetary tightening. Expect total housing starts to increase 16 percent year-over-year and total home sales to increase 3 percent.
- While home purchases will increase next year, higher interest rates will reduce the refinance volume pushing overall mortgage originations lower in 2016 than in 2015.