The Mortgage Bankers Association (MBA) today announced at its 2026 Annual Convention and Expo that total single-family mortgage origination volume is expected to decrease 5 percent to just under $2 trillion in 2027 from the $2.1 trillion expected in 2026.

Purchase originations are forecast to increase 0.8 percent to $1.42 trillion next year and refinance originations are expected to decrease by 17 percent to $571 billion. By loan count, total mortgage origination volume is expected to decrease by 5.6 percent to 5.0 million loans in 2027 from the 5.3 million loans expected in 2026.

MBA's 2027 outlook was presented by Mike Fratantoni, Chief Economist and Senior Vice President for Research and Business Development; Joel Kan, CMB, Vice President, Deputy Chief Economist; and Marina Walsh, CMB, Vice President, Head of Industry Analysis.

Fratantoni projects U.S. economic growth of 1.8 percent over the next year, as elevated interest rates, rising energy prices, and persistent inflation weigh on growth and keep interest rates higher for longer.

“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,” said Fratantoni. “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.”

MBA forecasts that the 10-year Treasury yield will average 5.1 percent in the fourth quarter of 2026 and remain close to 5 percent through 2027. MBA expects that the 30-year mortgage rate will average 7.3 percent in the fourth quarter of 2026 and remain above 7 percent through 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,” said Fratantoni. “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 percent to average 4.3 percent over the course of 2027.”

Fratantoni notes that there are substantial uncertainties associated with this forecast, with the potential for geopolitical or financial market shocks to further dampen consumer confidence, which could lead to an abrupt slowdown in the economy. The risks of a recession are elevated. At the same time, if the Middle East conflict were to intensify yet again, oil prices could spike even higher given the drawdowns in oil reserves, and this could lead to even higher inflation.

According to Kan, mortgage rates at their current levels have caused a pullback in application activity this year, both for home purchases and refinances. Prospective homebuyers have started to put their purchases on hold, as higher rates have brought affordability challenges back to the forefront. This is despite some relief in home price growth from the slowdown in demand and increased for-sale inventory in many 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 percent over the past month and MBA forecasts that it will remain over 9 percent through 2027,” said Kan. “We plan to add the ARM share to our monthly forecast publication going forward.”

Kan added that slower population growth and lower immigration will contribute to lower overall demand for housing. National home-price indices have shown annual growth down in the 2 percent range, indicating that the housing shortage is now not as severe as estimated in recent years.

“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,” said Kan.

Walsh noted that average net production profits in the second quarter of this year remained positive for independent mortgage banks for the fifth consecutive quarter, continuing the industry’s turnaround from widespread losses between 2022 and 2024. However, recent profits are still lower than the historical average of 39 basis points (bps) dating from 2008, and challenges remain, especially in light of the latest originations activity and forecast for the remainder of 2026 and beyond.

“In tough market conditions, many mortgage companies still manage to stay in the black while others struggle,” said Walsh. “The top 20 percent of 325 lenders averaged 122 bps (or $4,551 per loan originated)while the bottom 20 percent averaged a loss of 76 bps (or a loss of $2,551 per loan originated) in the second quarter of 2026. Differences in cost structure certainly play a role in explaining the wide variance. But production revenue appears to be the more prominent differentiator – whether resulting from product mix, pricing discipline, secondary marketing strategy, company affiliation, geography or other factors.”

Walsh continued, “The servicing side of the business continues to perform well. Higher loan balances have contributed to the rise in per-loan servicing revenues. Positive net escrow earnings have also contributed to the bottom line. While servicing costs have been relatively contained, there are upward cost pressures, particularly in default and loss mitigation. Both delinquencies and foreclosures are higher than they were a year ago, particularly for government loans. Delinquencies in other forms of consumer debt such as student loans, credit cards, and auto loans have grown in the past few years. These factors may be indicative of homeowner financial distress, exacerbated by stretched affordability and a slowing in home equity accumulation.”

MBA also released an updated forecast for commercial and multifamily originations.

CREF origination volume is expected to increase 1 percent and multifamily volume 2 percent in 2027 following solid growth for both in 2025.

“The CREF market is facing similar challenges as the residential market given the spike in interest rates. The minimal growth forecasted for 2027 results from the ongoing wave of loan maturities that will require refinancing, said Fratantoni.”

MBA's new Mortgage Finance Forecast and Economic Forecast can be viewed here. The CREF forecast is available here.