Key Details:
- The Mortgage Bankers Association’s 2025 forecast predicts total mortgage origination volume will rise to $2.3 trillion, up from $1.79 trillion in 2024.
- Purchase originations are expected to increase by 13%, totaling $1.46 trillion by 2025.
- Mortgage rates are expected to settle at 5.9%, with affordability challenges continuing as younger buyers enter the market.
The Mortgage Bankers Association (MBA) shared its forecast for mortgage originations in 2025, announcing that the total volume would rise to $2.3 trillion—up from the $1.79 trillion expected in 2024.
The forecast for purchase mortgage originations is also positive with a 13% increase to $1.46 trillion in 2025. By loan count, total mortgage originations are expected to increase by 28% to 6.5 million loans in the coming year—up from the 5.1 million expected in 2024.
The announcement came at MBA’s 2024 Annual Convention & Expo. MBA Chief Economist and Senior Vice President Mike Fratantoni, joined by Joel Kan, Vice President and Deputy Chief Economist, and Marina Walsh, CMB and Vice President of Industry Analysis, presented the forecast.
Fratantoni assessed the U.S. economy in 2024 as “stronger than expected.” But MBA’s forecast for 2025 includes a slowdown in economic growth and some additional incremental increases in the U.S. unemployment rate.
Monetary policy has turned the corner with the first rate cut in September 2024. The expectation of further rate cuts has already been baked into mortgage rates, and we expect mortgage rates are likely to remain within a narrow range around 6 percent for the foreseeable future. We are bullish about the spring 2025 housing market. Mortgage rates at this level should support homebuyer demand and gradually reduce the lock-in effect, thereby increasing the inventory of existing homes and supporting higher purchase origination volume in 2025.
The job market will likely slow somewhat as we enter 2025, with fewer jobs added and the unemployment rate increasing from its current rate of 4.1 percent to 4.7 percent by the end of 2025. Inflation will gradually decline towards the Fed’s 2 percent target by the end of 2025.
Economic & Rate Predictions
The spread between the 30-year fixed mortgage rate and the 10-year Treasury rate—currently around 240 basis points—is about half a percentage point wider than historical averages. MBA’s forecast has the spread narrowing further in 2025 as investors shift from cash holdings into longer-term assets.
As for mortgage rates, MBA’s baseline forecast has them ending 2025 at 5.9% and hovering near that level for the forecast horizon.
In his statement, Joel Kan, MBA Vice President and Deputy Chief Economist, said demographics would continue to support housing demand as younger buyers are either in or entering the market.
That said, housing affordability challenges remain, with elevated monthly mortgage payments combined with increases in homeowners insurance premiums, property taxes, and HOA fees.
There has been growth in purchase applications for both new and existing homes, with application levels above last year’s pace. Mortgage rates are lower than they were a year ago, and for-sale inventory has started to grow somewhat, which is helping to ease price pressures in many markets. It is also encouraging that an increasing share of first-time homebuyers have turned to newly built homes as an option, given the lack of previously owned starter homes on the market.
These factors should support a bigger gain in purchase activity early next year, especially if mortgage rates remain near these levels or decline further.
Mortgage Services
During her presentation, Marina Walsh, CMB and Vice President of Industry Analysis, noted encouraging signs of production profitability starting in Q2 2024 after eight quarters in a row of net production losses.
Walsh also acknowledged the possibility of increased delinquencies due to a slowing economy, natural disasters, and payment shock from increased homeownership costs.
Production volume began to pick up in the second quarter which led to a reduction in per-loan costs. With more volume forecast in 2025 and 2026, lenders may be poised to increase their head counts after two of the most difficult years in the mortgage business, but cost escalation remains an ongoing concern.
Mortgage servicing has enabled many lenders to stay profitable overall. We may see delinquencies rise modestly due to a slowing economy, natural disasters and payment shock from increasing property taxes, insurance and HOA and condo fees. Fortunately, between accumulated equity that stands at over $35 trillion and loan workouts, homeowners have more flexibility to resolve hardships.
