Mortgage market should improve to $2.3 trillion(!) in 2025, MBA says

The most challenging period for the mortgage industry appears to be in the rearview mirror, as the Mortgage Bankers Association (MBA) forecasts $2.3 trillion in origination volume for 2025—representing a robust 28.5% growth over 2024.

“We are in a much better place now than a year ago. Let’s keep that in mind when we look at this data. Looking at the originations forecast, the trajectory is up,” Marina Walsh, vice president of industry analysis, said at the MBA 2024 Annual Convention & Expo in Denver on Sunday. “It certainly is a purchase market, not a return to refis. That’s not going to be easy, but again, we are heading in the right direction.” 

Purchase originations are forecasted to increase to $1.45 trillion in 2025, up 13% year over year. Meanwhile, with the 30-year fixed mortgage rates projected to decline from an average of 6.3% in 2024 to 5.9% in 2025, refis are estimated to represent 37% of the volume next year, increasing from 28% this year. 

Mike Fratantoni, MBA senior vice president and chief economist, said that monetary policy has “turned the corner with the first rate cut in September 2024.” However, there is a risk that “growing budget deficits will keep longer-term rates from falling further.”

“We’ve seen an uptick in the 10-year Treasury yield that has been as low as 3.6%, and now we’re up to 4.25%. The speculation is that at least some of the drivers here are market participants thinking that the odds of a Trump administration, and particularly the odds of a red wave, have increased quite considerably, and that would potentially be putting upward pressure on rates,” Fratantoni said.

The explanation is that, based on the estimates from the Committee for a Responsible Federal Budget comparing Donald Trump and Kamala Harris’s proposals, there would be larger deficits under a Trump administration. However, according to Fratantoni, regardless of who wins this election, “you’re going to hear a lot more about this deficit and debt picture going forward.”

Another factor in the background is that global growth will be anemic in 2025, raising concern “that we may be getting stuck on a low growth, high debt pattern,” he added. For the U.S., t job market will likely slow, with the unemployment rate increasing from its current rate of 4.1% to 4.7% by the end of 2025. Inflation will gradually decline towards the Fed’s 2% target by the end of 2025.

“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% for the foreseeable future,” said Fratantoni.

Joel Kan, vice president and deputy chief economist at MBA, said that, by loan count, total mortgage origination volume is expected to increase by 28% to 6.5 million loans in 2025, compared to 5.1 million loans this year. 

According to Kan, mortgage rates are lower than a year ago, for-sale inventory has grown somewhat, and first-time homebuyers have turned to newly built homes as an option.

“If you go back to the 2000 to 2009 decade, we had about, on average, 3.1 million units for sale over that time frame. The next decade, we had about 2.4 million, and the most recent four years to date, we’re averaging about 1.6 million,” Kan said. “The good news here is that we saw an increase in the last two months to about 1.8 million units.” 

Kan added: “These factors should support a bigger gain in purchase activity early next year, especially if mortgage rates remain near these levels or decline further.”