The leading mortgage trade group is downgrading its origination forecasts as rates are cutting into anticipated refinance volume. 

The Mortgage Bankers Association is projecting $2.147 trillion in total originations for 1- to 4-family unit properties this year, it said Friday. That's a slight decline from the $2.163 trillion projection in July, and on par with the total loan volume the MBA is expecting in 2027.

The decline was driven by an approximately 5% reduction in refinance production, with $713 billion expected in the year. Purchase volume of $1.434 trillion through 2026 is a slight improvement on the MBA's forecast a month ago.

The latest report follows Fannie Mae's own downgrade of expected lending volume, as the government-sponsored enterprise's latest estimate put total origination volume this year around $2.17 trillion.

Mortgage rates hit their highest level in 12 months in July, and the National Mortgage News Lender Price index showed the 30-year fixed-rate mortgage just above 7% Friday. Markets are reacting to Treasury yields hitting 19-year high this week, as a confluence of macroeconomic factors collides. 

The MBA, which didn't comment on its forecast, is expecting the 30-year FRM to stick between 6.6% to 6.7% through 2028. Today's lofty rates are a far cry from the brief sub-6% rates earlier this year and are keeping more refi candidates at bay, said Doug Harter of BTIG.

"At current mortgage rates, we estimate that 3.6% of the market is 50 (basis points) 'in the money' to refinance," he wrote in a report Friday. "This is down 80 bps relative to last week given the modest move higher in rates."

Inside the numbers

Friday's forecast downgraded specific refinance projections for the third and fourth quarters by 8% and 12%, respectively. While purchase volume was still predicted to increase slightly in the next two years, annual refi volume estimates continued to fall, with just $655B industrywide originations expected in 2027.

The MBA is also anticipating single-family housing starts to remain sluggish, as home builders are increasingly struggling to attract prospective buyers. New single-family starts and sales are projected to bottom out this year, with rebounds expected in 2027. Annual home price growth is expected to hit a nadir this year, although it's expected to remain positive at 0.3% growth in 2026. 

The forecast also put the Federal Funds rate at 4.125% through 2027, as the trade group suggests incoming interest rate hikes. Ahead of the Federal Open Market Committee's next meeting in mid-September, the market is weighing slightly hotter inflation this summer.