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Economists at the Mortgage Bankers Association said they are slightly more pessimistic about the prospects for originations over the next two years than they were a month earlier, despite forecasting stronger economic growth.
The MBA released its forecast at its Annual Convention and Expo in Las Vegas Sunday.
The Oct. 19 forecast made little change to its forecast for total originations this year, but it lowered its expectations for total originations by 2% for 2026 and 3.8% for 2028.
Almost all of the downward revisions were for refinances, where origination forecasts were lowered by 5.6% for 2026 and 10% for 2027.
The MBA is now forecasting total originations will rise 20% to $2.03 trillion this year and rise 8% to $2.2 trillion in 2026 before going flat in 2027.
Chief Economist Mike Fratantoni said the U.S. economy will grow at a below-trend rate over the next year, as the economy faces headwinds from a softening global economy and uncertainties over the impacts of higher tariffs. However, the MBA’s Oct. 19 forecast showed it had raised its expectations for GDP growth this year and next, compared with its Sept. 19 forecast.
Fratantoni said he expects the Federal Open Market Committee to make two more rate cuts at its Oct. 28-29 and Dec. 9-10 meetings.
“While inflation is still above the Fed’s target, the job market has weakened, and we expect that the FOMC will continue to focus more on its full employment goal,” Fratantoni said.
Despite the Fed’s actions, Fratantoni said he expects the job market will weaken over the next year. Even though there have been no widespread layoffs, the pace of hiring remains slow, and the unemployment rate is expected to increase from its current rate of 4.3% to 4.7% by mid-2026.
Fratantoni said he expects inflation to be stubborn, as tariffs on imported goods will eventually be passed on to consumers in the form of higher prices.
The risk of growing budget deficits and elevated inflation expectations will keep longer term rates from falling further, even as the Fed cuts short-term rates. This will keep the 10-year Treasury yield above 4% and mortgage rates between 6 and 6.5%.
Its forecast showed mortgage rates stalling at 6.4% through the end of 2026, but Fratantoni said an increased housing supply will keep a lid on prices and help home sales improve in 2026.
The Oct. 19 forecast showed purchases rising 1.3% to $136 trillion this year, rising 7.7% to $1.46 trillion next year and 3.1% to $1.51 trillion in 2027.
Refinances are expected to nearly double to $675 billion this year and rise 9.2% to $737 billion in 2026 before falling 6% to $693 billion in 2027.
Contact Jim DuPlessis at JDuPlessis@cutimes.com.
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