The average rate for 30-year fixed-rate mortgages fell to 3.5% on Wednesday, the lowest daily level since April 2013.
Wells Fargo & Co., the nation's largest mortgage lender by origination volume, said Thursday that it expects mortgage volume industry wide to be 20% to 25% higher for the year than the roughly $1.5 trillion it initially anticipated. J.P. Morgan Chase & Co., the second-largest mortgage lender, also said Thursday that industry volume could be up by 50% this year from initial forecasts.
"There is much more demand than we expected," said Steve Hemperly, head of mortgage originations for J.P. Morgan. "We're not acting like this is a window that's closing quickly."
The Mortgage Bankers Association in May increased its expectations for new mortgages for 2016 to $1.608 trillion, its fourth increase from $1.380 trillion at the year's start.
The group also boosted the share of refinancing activity. It now expects that to be nearly 40% of total activity. It is up from 33% in the group's January forecast.
The pickup in refinancing marks a surprising turnaround for the mortgage industry. Lenders had expected mortgage rates to rise following the Federal Reserve's rate increase in December. Instead, after a brief pickup in the weeks that followed, rates began to decline over concerns about U.S. and global growth, the oil-price slump and China's slowing economy.
The situation also underscores how unpredictable the mortgage market has become since the financial crisis, as banks have encountered difficulties gauging loan demand and staffing levels.