In a decidedly unoptimistic forecast, economists from the Mortgage Bankers Association (MBA) said at the group’s annual convention in Las Vegas that mortgage rates will remain above 6% for the foreseeable future.
The forecast was not good news for lenders itching to cash in on the next refinancing wave, but Mike Frantantoni, who heads the MBA’s economic and research team, told the gathering that with 10-year Treasuries remaining in the 4%–4.5% range “going forward,” long-term mortgage rates are likely to go “higher rather than lower.”
While many are betting loan rates will dip below the magic 6% level sometime next year, Frantantoni said that “is not showing up in the data yet.”
There are “a number of headwinds” still facing the economy, the chief economist said, not the least of which are the various and sundry tariffs placed on other countries. That alone will drive a seven-fold increase in the deficit, and as a result, he added, economic growth will slow and prices will rise.
He also expects the inflation rate to “pick up again.”
“After all that work we went through to get inflation under control,” he said, “it sure looks like it's going the other way.”
Given the challenges the Fed faces on the inflation front, Frantantoni thinks the central bank will cut interest rates two more times before the close of 2025 and once next year.
On a more positive note, the MBA’s projections for originations will hit $2.198 trillion next year, up 8% from 2025’s totals, and then are projected to reach $2.199 trillion in 2027 and $2.213 trillion in 2028. “It looks like this is about the market we will be living in,” Frantantoni added.
MBA Deputy Chief Economist Joel Kan said home sales should rise 2.5% or so to approximately 4.353 million in 2026, 4.513 million in 2027, and 4.668 in 2028. Of those, 724,000, 758,000, and 766.000, respectively, will be newly constructed homes.
Kan, noting that purchase money mortgages typically account for 70% of all originations, said purchase applications have increased 15%–20% over the last six months. He also said pull-through rates also are increasing, but he did not put a number on that statement.
On another positive note, Kan said housing affordability is coming down. The principal and interest component of the typical mortgage payment is down from $2,230 in April 2024 to $2,067 in September. Kan added that the "significant challenge” when it comes to affordability lies in the other monthly housing costs. Since 2019, he said, quoting figures from ICE Mortgage Technology, insurance costs are up 69%, while property taxes are up 27%.
Kan said more and more who are refinancing are switching to adjustable rate mortgages (ARMs) to ease their monthly cost burden. He called it “a recent development that may be around for a little bit longer.” In terms of units, Kan projects that the number of mortgages will rise 8% next year to 5,824, then dip back down to 5,822 in 2027, and 5,816 in 2028.
In his presentation, Frantantoni said the combination of lower mortgage rates and flat housing prices will continue to help affordability.
“While mortgage rates are not expected to decline further, housing supply has increased in recent months, which will ease home-price growth and provide more housing options for prospective buyers,” Kan said. “The increase in inventories will put downward pressure on home prices across the country.”
He expects home prices to decline on a national level for several more quarters over the next few years.
