MBA Lowers Mortgage Forecast Again

The MBA lowered its forecast for refinances by 13% to $300 billion for the first half of 2025. That level of originations would be 63% higher than a year earlier, down from the 93% gain in its Nov. 21 forecast.

The changes for purchases were milder. The MBA said it expects $642 billion in purchase originations in the first half, which reflects a downward revision of 4.3%. The new forecast means purchases would be 2% higher than a year earlier, down from the 7% gain in its Nov. 21 forecast.

Altogether the MBA lowered its total forecast by 7.4%. It said it now expects $942 billion in first mortgage originations in the first half of 2025, up 17% from a year earlier. The Nov. 21 forecast had assumed a 26% gain.

The MBA’s Nov. 21 forecast made deeper downward revisions from 2025 through 2027.

The downward revisions in the Dec. 20 forecast were focused on the first quarter, lowering refinances 23% in the first quarter and 3% in the second quarter. Purchases were lowered 7% in the first quarter and 2% in the second quarter.

The MBA continues to forecast that rates for 30-year, fixed-rate mortgages will fall from 6.6% this month to 6.4% by the end of 2025 and 6.3% by end of 2026. Those rates reflect changes in the MBA’s Nov. 21 forecast, which raised expectations for mortgage rates by 30 to 50 basis points over the next two years.

“MBA’s forecast for mortgage rates moved up after the election, anticipating this change and recognizing the market’s reaction to the likely path for fiscal policy and the deficit,” MBA Chief Economist Mike Fratantoni said. “MBA is forecasting that mortgage rates will average close to 6.5% over the next few years, with significant volatility around that average.”

The Fed cut rates by 25 bps Dec. 18, and released projections showing half of its Federal Open Market Committee members expect rates to fall only 50 bps next year, instead of the 100 bps expected three months earlier.

The projections showed half the FOMC members expect the federal funds rate will fall from 4.4% at the end of this year to 3.9% at the end of 2025. Three months ago the median was 2.9% by the end of 2025.

After the Fed meeting, Fratantoni said December’s cut and fewer cuts in 2025 had already been priced into the mortgage market.

“The projections also showed somewhat faster growth and somewhat higher inflation in the near term relative to the projections in September,” Fratantoni said. “While the unemployment rate has increased over the past year, and inflation has trended down, in recent months, inflation has plateaued.”

Freddie Mac reported the average rate for 30-year, fixed-rate mortgages was 6.72% last week, up 5 basis points from a year earlier and up 12 bps from the prior week.

Rates fell from a 2024 high of 7.22% in May to a two-year low of 6.08% in September, but have risen since then.

“Homebuyers are slowly digesting these higher rates and are gradually willing to move forward with buying a home, resulting in additional purchase activity,” Freddie Mac said.