Mortgage Originations Projected to Decline in 2027
The Mortgage Bankers Association (MBA) announced at its 2026 Annual Convention and Expo that single-family mortgage origination volume is anticipated to decline by 5%, reaching just under $2 trillion in 2027, compared to the $2.1 trillion projected for 2026.
Purchase originations are projected to rise by 0.8% to $1.42 trillion in the coming year, while refinance originations are anticipated to fall by 17% to $571 billion. Measured by loan count, total mortgage origination volume is expected to decline by 5.6% to 5.0 million loans in 2027, down from the 5.3 million loans anticipated in 2026.
MBA’s 2027 forecast was presented by Mike Fratantoni, Chief Economist and SVP for Research and Business Development; Joel Kan, CMB, VP of Deputy Chief Economist; and Marina Walsh, CMB, VP of Head of Industry Analysis.
Fratantoni forecasts U.S. economic expansion of 1.8% over the forthcoming year, as persistently elevated interest rates, increasing energy costs, and ongoing inflationary pressures constrain economic growth and sustain higher interest rates for an extended period.
“Mortgage rates have recently spiked to their highest level in more than three years, while 10-year Treasury rates have reached their highest levels in 24 years. Around the world, there are too many borrowers and not enough savers. Inflation is too high, leading central banks to raise short-term rates, while budget deficits and debt are unsustainably high, leading bond investors to push up longer-term rates,” Fratantoni said. “MBA expects that mortgage and Treasury rates are likely to come down from their recent peaks, but will remain on a higher path than previously forecasted, which will be a serious headwind for origination volume for the remainder of this year and into 2027.”
Forecasts and Commentary
The MBA projects that the 10-year Treasury yield will maintain an average of 5.1 percent during the fourth quarter of 2026, with expectations for it to remain proximate to 5% throughout 2027. The MBA anticipates that the 30-year mortgage rate will average 7.3% in the fourth quarter of 2026, with projections indicating it will sustain levels exceeding 7% during 2027.
“The FOMC hiked the federal funds rate by 25 basis points in September, and we expect two additional 25 basis point hikes, one in December of this year and the second in the first quarter of 2027. Inflation remains well above the Fed’s target, and while the job market is not strong, we expect that the FOMC will continue to focus intently on pushing inflation down to its 2 percent inflation target,” Fratantoni said. “The job market will likely hold steady over the next year. The unemployment rate is forecast to increase slightly from its current rate of 4.2% to average 4.3% over the course of 2027.
Fratantoni emphasizes that considerable uncertainties underpin this projection, as geopolitical disturbances or financial market disruptions could substantially erode consumer confidence, potentially triggering a sharp economic contraction. Recession risks remain notably elevated. Conversely, should the Middle East conflict escalate further, petroleum prices may experience significant increases given the depletion of strategic oil reserves, which could precipitate even more pronounced inflationary pressures.
According to Kan, prevailing mortgage rates have prompted a decline in application submissions throughout the year, encompassing both home acquisition and refinancing activities. Prospective homebuyers have deferred their acquisition plans, as elevated rates have reintroduced affordability constraints as a primary concern. This occurs notwithstanding some moderation in residential price appreciation resulting from diminished demand and expanded inventory availability across numerous markets.
“The buyers who are still in the market are increasingly turning to ARM loans or paying points to lower their rates for the life of the loan. The ARM share of applications averaged almost 10% over the past month and MBA forecasts that it will remain over 9% through 2027,” Kan said. “We plan to add the ARM share to our monthly forecast publication going forward.”
Kan further emphasized that a deceleration in population expansion coupled with reduced immigration levels will exert downward pressure on aggregate housing demand. National residential property price indices have demonstrated year-over-year growth rates declining to approximately 2%, suggesting that the housing supply deficit has become less acute than projections made in preceding years.
Walsh observed that mean net operating profits for independent mortgage banking institutions during the second quarter of the current year maintained positive performance for the fourth consecutive quarter in succession, reflecting the sector’s recovery trajectory from substantial losses incurred throughout 2022 and 2024. Nevertheless, contemporary profit margins remain diminished relative to the long-term benchmark of 39 basis points (bps) established since 2008, and considerable obstacles persist, particularly given current origination volumes and anticipated market conditions extending through 2026 and subsequent periods.
“We expect declining levels of new construction for both single-family and multifamily homes over the forecast period. With fewer housing starts and relatively flat home sales expected, our forecast is for national home price growth to decelerate in 2027 before gradually picking up again in 2028,” Kan said.
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