High mortgage rates are ‘leaving a mark,’ MBA economists observe

On a day when Chicago Marathon gridlock made getting to the Mortgage Bankers Association’s annual conference a logistical challenge, the MBA’s top economists had a message for originators: Even if you feel like you’re hitting the wall in the higher-for-longer rate environment, stick it out for the long run.

“I think we’re going to come down from this spike in rates,” Mike Fratantoni, the MBA’s chief economist, said in opening remarks Sunday. “The unfortunate news is, I don’t think we’re going to come down that far.”

The baseline forecast of the MBA’s team of economists calls for 30-year mortgage rates staying above 7% for all of next year. They predict origination volumes will be 5% lower year over year in 2027. They don’t believe the Federal Reserve will return inflation to its 2% target until 2028 at the earliest. They think there is a 35% chance of an economic recession over the next 12 months.

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“Unfortunately, this spike in rates, as you all well know, is leaving a mark on both our expectations for home sales, home prices and for origination volume all the way through 2027,” Fratantoni said.

Looking purely at the headline labor figures, the job market “has really been quite resilient” despite myriad headwinds, Fratantoni remarked. But beneath the surface, job market sentiment “is really kind of ugly,” he added, pointing to job security concerns among U.S. workers and the difficulties new college graduates have had in breaking into the workforce.

MBA Deputy Chief Economist Joel Kan, who received a Certified Mortgage Banker certification later that evening, flagged the challenging refinance climate.

“With rates in the 7% to 7.5% range, it’s just very difficult for anyone to really find that justification to refi,” he said.

Kan also observed a shift toward adjustable-rate mortgages on the purchase side, which have more appealing upfront rates but are riskier long-term propositions.

The ARM share of total mortgage applications stood at 10.3% last week. The MBA sees that share staying in the 9% range for the next year, Kan said.

But on the brighter side, Kan sees manufactured housing provisions in the 21st Century ROAD to Housing Act potentially helping mitigate the dearth of affordable housing stock.

Marina Walsh, the MBA’s head of industry analysis, also sees signs for optimism. The top 50 lenders originate 50.37% of all loans, Walsh noted. But she sees that as an opportunity, not a cause for concern, pointing out that nonbanks still play an outsized role in mortgage lending, and there were 4,658 companies originating loans in 2025.

“There’s been a lot of talk of consolidation, but we still have a lot of players in this space,” Walsh said.

Summing up, Walsh referenced the Chicago endurance race, which saw several runners almost crack the elusive two-hour mark.

“We persist as an industry,” she said. “We do persist, just like the marathoners today.”