The Mortgage Bankers Association has tempered its expectations for growth in originations over the next three years as it expects a weak economy and slower growth in home sales.
Meanwhile, the National Association of Realtors (NAR) on Monday reported the number of existing home sold in May was a 0.8% higher than April after seasonal adjustments and down 0.7% from May 2024.
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“The relatively subdued sales are largely due to persistently high mortgage rates,” NAR Chief Economist Lawrence Yun said. “If mortgage rates decrease in the second half of this year, expect home sales across the country to increase due to strong income growth, healthy inventory, and a record-high number of jobs.”
MBA’s forecast dated June 20 shows $1.10 trillion in total mortgage originations in the final six months of 2025, up 13% from the second half of 2024 after a 3% downward revision. MBA also lowered its forecast by 6% for 2026 and nearly 7% for 2027.
The bulk of downward revisions were for purchases. MBA lowered its purchase forecasts by 4% for the second half, 8% for 2026 and 10% for 2027. Refinance forecasts were lowered by just 1% for the second half, 2% for 2026 and none for 2027.
MBA now expects:
- For the second half, originations for purchases to rise 10% to $728 billion, while refinances rise 20% to $374 billion.
- For 2026, originations for purchases to rise 7% to $1.46 trillion, while refinances rise 17% to $781 billion.
- For 2027, originations for purchases to rise 3.6% to $1.51 trillion, while refinances fall 1% to $774.
The forecast includes slower growth in both new and existing homes over the next three years.
Also economic growth is expected to slow to a crawl in the second half.
GDP, which fell 0.2% in the first quarter, is expected to rise 2% in the third quarter, but then droop to only 0.1% in the third quarter and 0.4% in the fourth quarter. Third-quarter growth was expected to be 1.7% in the Jan. 19 forecast and 0.7% in the May 16 forecast.
The June 20 forecast expects GDP to grow 1.5% in 2026 and 1.8% in 2027.
Interest rates for 30-year mortgages are expected to end the year at 6.70%, or 10 basis points higher than in the May 16 forecast.
MBA’s Weekly Mortgage Applications Survey showed the average contract interest rate for 30-year fixed-rate mortgages backed by the FHA were 6.84% for the week ending June 13, down from 6.93% a week earlier.
Joel Kan, MBA’s deputy chief economist, said the rate was its lowest since April.
“Mortgage rates decreased last week, driven by financial market volatility caused by current geopolitical conflict and ongoing tariff uncertainties. The 30-year fixed rate decreased to 6.84 percent, its lowest level since April,” said Kan.
MBA’s survey found the number of mortgage applications fell 3% from the previous week after seasonal adjustments and was up 14% from a year earlier. Refinance applications fell 2% from a week earlier and rose 25% from a year ago.
“Even with lower average mortgage rates, applications declined over the week as ongoing economic uncertainty weighed on potential homebuyers’ purchase decisions,” Kan said.
Contact Jim DuPlessis at [email protected].
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Jim DuPlessis
Jim covers economic data trends emerging for credit unions, as well as branch news and dividends.
