The recent drop in mortgage interest rates is already having an impact on overall mortgage demand as well as the demand for refinances, but just how much could the return of low interest rates impact the market?

Quite a bit, according to new data from iEmergent.

iEmergent, a mortgage forecasting and advisory firm, is projecting a 3.9% jump in total home-loan volume this year. That puts iEmergent at the head of the forecasting pack.

Freddie Mac is expecting a gain of 1.5% for total mortgage lending, according to its March mortgage finance forecast. The Mortgage Bankers Association pegs the increase at 1%, and Fannie Mae expects a drop of about half a percentage point.

Mark Watson, iEmergent’s director of forecasting, said the difference in outlooks is due to expectations about home sales.

In fact, he’s calling for $1.2 trillion in home purchase lending this year. That would make it the best year for that category since 2005. And the reason? Low interest rates.

“We think the lower mortgage rates will create a huge push, partly from Millennial buyers, that’s going to support strong growth in home sales over the next several years,” Watson said in an interview.

The decline in mortgage rates this year is due to two factors, said Watson. One is Brexit, Britain’s stalled efforts to leave the European Union. British government missteps have caused a “flight to safety” among international investors that increased demand for U.S. dollar-denominated bonds, which translated into lower rates for homebuyers, said Watson.

The second reason for lower rates? The U.S. economy’s “hangover” from federal tax cuts that became law more than a year ago, he said.

“The tax changes were a positive for the economy at first, but a big part of the stimulus from that is over and now it’s going to be more of an economic hangover because deficits are going to be higher,” he said.

At first, many economists thought those deficits would result in higher mortgage rates because the government would have to increase borrowing, Watson said. But, signs of a slowing U.S. economy at 2018’s end caused the Federal Reserve to stop raising rates at its January meeting, and recently signal that it does not plan to raise rates again this year.

Instead, the policy makers pledged to be “patient” before pushing up borrowing costs.

“Before that time, everyone thought they were going to do at least two, or maybe even three, rate-rises this year,” said Watson. “That’s clearly not going to happen, now.”

In March, Fed Chairman Jerome Powell said there will be no rate hikes in 2019. And, because Fed policy makers are loath to look like they are influencing national elections, they may hold steady in 2020 as well, Watson said.

The reason the Fed has the option to hold rates steady is the low rate of inflation, he said.

“It looked for a period of time like inflation was going to go over the Fed’s 2% target,” said Watson. “Then it dipped down and that gave the Fed a lot of cover to say we’re going to slow down on rates rises.”

And because of that, mortgage rates could very well stay low for a while, which could mean good news for those in the housing market.