MBA Chart of the Week: Annual Origination Dollar Volume
Source: MBA Forecast
At its December meeting, the FOMC cut their rate target by another 25 basis points as the market had anticipated. However, this was seen as a “hawkish cut,” as the FOMC members’ projections regarding the future path for the federal funds rate moved up, both in the near term, as well as for their expectations for the longer-term neutral rate. MBA forecasts that the federal funds rate will only drop to a range of 3.75% to 4% this cycle. Expectations that the Fed will cut rates less than had been anticipated have been priced into the market in the form of a higher 10-year Treasury yield and higher mortgage rates in recent weeks – the 10-year closed yesterday at 4.56% after starting the week at 4.4%.
MBA’s forecast for mortgage rates moved up after the November election anticipating this change as well as recognizing the market’s reaction to the likely path for fiscal policy and the deficit. MBA is forecasting that mortgage rates will average close to 6.5% over the next few years, with significant volatility around that average. Mortgage rates at these levels will likely limit the expected growth in refinance volume, although still showing 37% growth to $672 billion in 2025 from $491 billion in 2024.
We expect an 8% increase in purchase origination volume in 2025 to $1.4 trillion, driven by housing demand from buyers moving for reasons such as employment, family, and other significant life changes. There have been signs of gradually loosening housing inventory in many local markets which has eased price pressures and provided prospective buyers with more purchase options, although the structural undersupply of housing will keep home price growth from moderating much further. Total origination volume is expected to grow by 16% to $2.1 trillion in 2025 and we expect a similar 15% increase in 2026 to $2.4 trillion, supported by 16% growth in purchase volume.
Happy Holidays!
-Mike Fratantoni (mfratantoni@mba.org); Joel Kan (jkan@mba.org)
