Total mortgage origination volume is forecast to increase to $2.3 trillion in 2025, up 28% from the $1.79 trillion expected in 2024, according to the Mortgage Bankers Association (MBA).
Purchase originations are forecast to increase 13% to $1.46 trillion.
By loan count, total mortgage origination volume is expected to increase to 6.5 million loans, up from 5.1 million loans expected this year.
Mike Fratantoni, chief economist and senior vice president for research and business development, says although the economy has been stronger than expected this year, the MBA is forecasting a slowdown in economic growth and additional incremental increases in the unemployment rate in 2025.
“Monetary policy has turned the corner with the first rate cut in September 2024,” says Fratantoni, in a statement. “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 percent for the foreseeable future. We are bullish about the spring 2025 housing market. Mortgage rates at this level should support homebuyer demand and gradually reduce the lock-in effect, thereby increasing the inventory of existing homes and supporting higher purchase origination volume in 2025.”
Fratantoni discussed the forecast during the MBA’s 2024 Annual Convention & Expo, now under way in Denver.
“The job market will likely slow somewhat as we enter 2025, with fewer jobs added and the unemployment rate increasing from its current rate of 4.1 percent to 4.7 percent by the end of 2025. Inflation will gradually decline towards the Fed’s 2 percent target by the end of 2025,” Fratantoni adds.
As the MBA explains in its forecast, the risk of growing budget deficits will keep longer term rates from falling further, even as the Fed cuts short-term rates.
The spread between mortgage and Treasury rates, at around 240 basis points currently, remains roughly half a percentage point wider than historical averages. The MBA expects additional narrowing of this spread in 2025 as investors reallocate out of cash and into longer-term assets.
Photo: Priscilla Du Preez