Abstract
Over the past 35 years, we have witnessed a tremendous secular decline in interest rates. Mortgage rates peaked at over 18% in 1981 and were down to 3.54% by the fall of 2016. Rates have now begun to rise, and although it is not clear how high they will go, it is clear that the secular decline in rates is over. This article identifies and examines six impacts on the mortgage market due to the end of the secular decline in interest rates: (1) decrease in mortgage origination volumes, (2) lower originator profitability and more industry consolidation, (3) slower prepayment speeds, (4) higher home prices, (5) weak repeat homebuyer activity, and (6) possibility of the second lien market.
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