BAM Key Details:
- The Mortgage Bankers Association forecasts 30-year mortgage rates averaging 7.3% in Q4 2026 and staying above 7% through 2027, with two more quarter-point Fed hikes expected by Q1 2027.
- A 5% drop to $1.99 trillion in single-family origination volume is projected for 2027, with refinances down 17% and purchase originations up 0.8% to $1.42 trillion.
- Rounding out MBA’s outlook are recession odds of about 35% over the next 12 months and an ARM share above 9% through 2027.
At the Mortgage Bankers Association’s annual convention in Chicago, MBA Chief Economist Mike Fratantoni said he expects the 30-year rate to stay above 7% through the end of 2027.
Rates averaged 7.40% last week, according to Freddie Mac. It’s the highest level in three years.
MBA’s most recent forecast goes well beyond rates, covering Fed policy, loan volume, home prices and recession odds, and giving agents a fuller picture of the market they’ll be working in next year.
Here’s what’s in the forecast and what it means for your conversations this year and next.
Where MBA Sees Rates Heading
Fratantoni’s forecast calls for rates to stay high for at least another year. Here’s what MBA expects for the 30-year mortgage rate and the 10-year Treasury yield:
- 30-year mortgage rate: 7.3% average in Q4 2026, staying above 7% through 2027
- 10-year Treasury yield: 5.1% average in Q4 2026, staying close to 5% through 2027
Lenders use the 10-year yield as a benchmark for mortgage rates because most 30-year loans get refinanced or paid off through a home sale within about 10 years. Last week, the 10-year yield hit 5.36% in intraday trading, its highest level since 2002.
Fratantoni told the convention crowd how much relief he thinks buyers can expect.
“We’re going to come down from this spike in rates. The unfortunate news is I don’t think we’re going to come down that far.”
What’s Keeping Rates Up
Inflation is the biggest force behind the forecast. Last year, the worry was tariffs pushing prices up. This year, Fratantoni pointed to energy price shocks, which Realtor.com ties to the global oil shock from the war with Iran.
Fratantoni explained how pressure from central banks and the bond market is pushing rates up.
“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.”
Last month the Fed raised its benchmark rate for the first time in three years, and MBA expects more hikes on the way. MBA’s economists laid out this path for the Fed:
- A quarter-point hike in December
- Another quarter-point hike in Q1 2027
- A federal funds rate range of 4.25% to 4.5% after both hikes, a level last seen in August 2025
Fratantoni said the Fed will keep its attention on inflation even with a softer job market.
“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% inflation target.”
How Buyers and Owners Are Reacting
Higher rates are thinning out the purchase market. MBA Deputy Chief Economist Joel Kan said buyer activity fell off once rates moved into the 7s.
“Once we hit the 7% range, you can see purchase activity dropping off a little bit more significantly. Now we’re running at about 9% below where you were in January.”
The buyers who stay in the market are changing how they finance. More of them are choosing adjustable-rate mortgages, or ARMs. These loans start with a lower rate that can reset after an intro period. Realtor.com notes that ARMs carry more risk for buyers, since monthly payments could rise a lot down the road.
Kan described what MBA’s survey data tells it about buyers’ loan choices.
“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.”
Meanwhile, homeowners with rates under 4% or 5% have little reason to move or refinance.
The Rest of MBA’s 2027 Forecast
MBA expects total mortgage volume to fall in 2027, and refinances will take the biggest hit. The origination forecast breaks down like this:
- Total single-family dollar volume: $1.99 trillion, down 5% from the $2.1 trillion projected for 2026
- Total loan count: 5.0 million, down 5.6% from 5.3 million
- Purchase originations: $1.42 trillion, up 0.8%
- Refinance originations: $571 billion, down 17%
Realtor.com reports that MBA expects purchase applications to dip a little from 2026 levels. Applications measure something different from the dollar volume of purchase loans.
Home prices have been growing about 2% a year nationally. Kan said he reads that as a sign the housing shortage isn’t as severe as earlier estimates suggested. Realtor.com’s own economists put the national housing shortfall at more than 4 million units.
The Play for Agents
MBA’s forecast shows agents what their clients’ rate environment will probably look like through 2027.
Here are a few ways to put it to work, based on what MBA’s economists said:
- Reset rate expectations. If MBA is right, clients holding out for rates far below 7% may be waiting until 2028 or beyond.
- Prep buyers for ARM and points conversations. With close to 1 in 10 applicants choosing ARMs, buyers will hear about these options from lenders. Encourage them to talk with more than one lender and ask how high an ARM payment could climb after the intro period.
- Count on slow but steady buyer demand. MBA expects purchase loan volume to edge up in 2027, so buyers will keep coming to market.
- Bring slower appreciation into pricing talks. MBA expects national price growth to slow from its current 2% range in 2027, and sellers should hear that before they set a list price.
- Keep manufactured housing on your radar. Kan sees an opening for it in the starter-home market as Road to Housing support kicks in.
Buyers and homeowners in your market are likely seeing the higher rates and wondering whether it makes more sense to buy (or list) now or to wait and hope for a rate drop in 2027.
This forecast gives you an expert take to share, along with local market insights, like:
- Days on market
- Sale-to-list price ratio
- Price per square foot for new vs existing homes on the market
- Share of home sales with price reductions
Be ready to compare the numbers with potential buyers and sellers so they see which path makes the most sense for them right now.
