MBA Sees 2027 Mortgage Lending Below $2 Trillion as Refinance Volume Drops 17%

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The Mortgage Bankers Association has lowered its expectations for the mortgage business in 2027, forecasting a 5% decline in total single-family originations even as purchase lending edges higher. A sharper pullback in refinancing and an extended period of mortgage rates above 7% are at the center of the new outlook.

In its October 11 forecast released at the association’s annual convention, MBA projected just under $2 trillion in mortgage originations for 2027, compared with $2.1 trillion expected in 2026. Purchase originations are forecast to rise 0.8% to $1.42 trillion; refinancing is expected to drop 17% to $571 billion.

The divergence matters for lenders planning staffing, branch economics and secondary-market operations. Purchase business depends heavily on relationships with buyers, agents and builders. Refinancing is more sensitive to the incentive for existing borrowers to replace their current mortgages. With rates elevated, fewer households have a compelling reason to refinance.

MBA projects about 5 million loans next year, down 5.6% from an estimated 5.3 million in 2026. That means lenders could face fewer transactions even if average loan sizes remain high. The association’s figures are forecasts, not completed lending totals, and remain vulnerable to changes in inflation, Treasury yields and consumer demand.

The latest outlook represents a material development beyond WRE News’s earlier coverage of MBA forecast reductions. At the October convention, the association specified the purchase-versus-refinance split and tied the revised numbers to a markedly higher rate path and weaker refinancing economics.

Chief economist Mike Fratantoni expects the 30-year mortgage rate to average 7.3% in the fourth quarter of 2026 and stay above 7% through 2027. MBA also forecasts the 10-year Treasury yield averaging 5.1% late this year and remaining near 5% next year. Those assumptions help explain why MBA does not anticipate a broad refinancing rebound.

Fratantoni pointed to persistent inflation, higher energy prices, government borrowing and pressure on global bond markets. He expects U.S. economic growth of 1.8% over the next year and sees elevated recession risk. MBA anticipates two additional quarter-point Federal Reserve rate increases, one in December and another in early 2027. Those are MBA’s projections; they are not announced Federal Reserve decisions.

Deputy chief economist Joel Kan said borrowers still seeking homes have increasingly turned to adjustable-rate mortgages or paid discount points to reduce their mortgage rates. The ARM share of applications averaged nearly 10% over the preceding month, according to MBA. The group expects it to stay above 9% through 2027 and plans to add the measure to its monthly forecast.

That shift changes the questions lenders and borrowers must address. An adjustable-rate loan may lower initial payments but exposes the borrower to future rate resets under the loan contract. Discount points require cash upfront and may not pay off for a homeowner who sells or refinances before reaching the break-even period. The right choice depends on the actual terms and the borrower’s plans, not the forecast alone.

MBA also expects home-price growth to slow in 2027, with fewer single-family and multifamily starts. Kan cited slower population growth and lower immigration as contributors to softer housing demand. A slower rate of price appreciation could improve affordability at the margin, but elevated borrowing costs would continue to limit purchasing power.

The financial strain is not uniform across mortgage companies. Marina Walsh, MBA’s head of industry analysis, said independent mortgage banks had positive average net production profits for a fifth consecutive quarter in the second quarter of 2026. Yet the top fifth of a 325-lender sample earned an average 122 basis points, or $4,551 per loan, while the bottom fifth lost 76 basis points, or $2,551 per loan.

That spread points to differences in revenue, pricing, product mix and operating costs. Walsh said servicing has remained comparatively resilient as larger loan balances support revenue and escrow earnings, although default and loss-mitigation expenses are increasing. She also noted higher delinquencies and foreclosures than a year earlier, particularly on government loans.

Commercial and multifamily lending face their own constraints. MBA forecasts commercial real estate finance originations rising 1% in 2027 and multifamily volume increasing 2%, supported in part by loans that must be refinanced as they mature. Those modest increases are not evidence of a broad commercial property recovery.

The forecast is a planning benchmark, not a certainty. A quicker decline in inflation or bond yields could improve refinance demand, while renewed geopolitical shocks or weaker employment could deepen the slowdown. For mortgage executives, the immediate implication is to test 2027 budgets against a smaller loan count and a market that may remain heavily dependent on purchase business.