Mortgage Bankers Lower Forecasts Through 2026
As rates fall slower than expected, gains in first-mortgage originations for credit unions will be smaller.
The Mortgage Bankers Association lowered its forecast for first-mortgage originations for the next two years as interest rates remain higher than it expected a month ago.
The MBA’s forecast dated Thursday lowered forecasts by 10% for 2024, 9% for 2025 and 4% for 2026 from its March 21 forecast.
The MBA said it still expects gains this year from the historic lows of 2023. Total originations this year are expected to be $1.82 trillion, up 11% from last year.
The MBA’s forecast was released about seven hours after the National Association of Realtors reported existing-home sales fell 4.3% from February to March.
NAR estimated existing homes sold at a seasonally adjusted annual rate of 4.19 million in March, down from 4.38 million in February and 4.35 million a year earlier.
“Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves,” NAR Chief Economist Lawrence Yun said. “There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) was 7.13% April 12, up from 7.01% a week earlier.
MBA Deputy Chief Economist Joel Kan said Wednesday that rates reached their highest level since December.
“Rates increased for the second consecutive week, driven by incoming data indicating that the economy remains strong and inflation is proving tougher to bring down,” Kan said. “Despite these higher rates, application activity picked up, possibly as some borrowers decided to act in case rates continue to rise.”
The MBA’s downward revisions were about the same this year for both purchase and refinance first mortgages.
Purchase originations are expected to rise 5% to $1.39 trillion this year, while refinances are expected to rise 34% to $422 billion.
The downward revisions were heaviest for this year’s second quarter with forecasts for both purchases and refinances lowered by 15%. Refinances expected to drop by 14% in the third quarter. In other quarters through 2025 the revisions were down by about 6% to 11%.
The MBA’s April 18 forecast also:
- Raised its forecast rates on 30-year fixed-rate mortgages. It now expects them to fall to 6.4% by year’s end, up from the 6.1% year-end rate in March’s forecast. It expects rates to fall to 5.9% by December 2025, up from its previous forecast of 5.6%.
- Lowered its estimates for existing home sales this year by 1.4% and for new home sales by 3.8%. It now expects existing home sales to rise 5% to 4.3 million this year, and new home sales to rise 9.5% to 735,000.
- Raised its expectations for Real Gross Domestic Product (GDP) growth. For the second quarter it expects GDP to grow 1.3%, up from 0.8% in its March 21 forecast. For the year, it expects 1.3% GDP growth, compared with its March forecast of a 1% gain this year.