Mortgage rates have been on the upswing for most of the second half of 2026, but consumers and housing professionals got a respite this week.
At HousingWire‘s Mortgage Rates Center, rates for 30-year conforming loans averaged 7.52% on Tuesday — down 11 basis points from one week ago. Rates for 30-year loans through the Federal Housing Administration (FHA) averaged 7.18%, down 19 bps in the past week and 41 bps lower than two weeks ago. Rates for 30-year jumbo loans rose 1 bps to 7.76%.
The higher-for-longer rate environment is being felt in the form of lower consumer demand, which is expected to continue through next year. At last week’s Mortgage Bankers Association (MBA) Annual Convention & Expo in Chicago, the trade group’s economists announced an expected pullback in single-family origination volumes, with totals declining from an estimated $2.1 trillion in 2026 to $1.99 trillion in 2027.
Fannie Mae and Bank of America released even lower projected totals for 2027 of $1.8 trillion and $1.72 trillion, respectively.
“Mortgage applications declined further last week as the 30-year fixed mortgage rate surpassed 7.5%, continuing to strain affordability and dampen demand,” Bob Broeksmit, the MBA’s president and CEO, said in a statement. “Both purchase and refinance activity remain sensitive to rising rates, with prospective borrowers facing higher financing costs.
“MBA forecasts a 5% decline in single-family mortgage originations to just under $2 trillion in 2027, although improving housing inventory and pent-up demand could boost purchase activity.”
Treasury yields pull back sharply
The recent declines for 30-year mortgage rates coincide with a sharp drop in the 10-year Treasury yield, which fell from a recent peak of 5.31% on Oct. 5 to 5.09% on Oct. 16. Spreads between the 30-year mortgage rate and 10-year Treasury, however, stood at 2.21% on Oct. 15, up from the recent low point of 1.92% in early September.
In his weekly “Ribler on Rates” video series, Dan Ribler of Longbridge Financial said that a quick decline in Treasury yields of this magnitude is unusual.
“For context on how big of a move that is, in the last five years, there have been two times, two days, where we have seen a 25-basis-point or larger reduction in yield on the 10-year Treasury. … Depending on how you spot this, this is a once every five years or so type of move. It’s a big deal.
“The headlines are telling you, ‘Hey, it’s AI stocks selling off, dollars are moving into Treasuries, and that’s true. But if you go a little bit deeper, it’s not just AI stocks. This is the market repricing how they look at dollars flowing into AI risk, and somehow it’s all happening (at once),” he added.
With the next Federal Reserve meeting on tap Oct. 28, recent employment and inflation data point to monetary policymakers keeping the overnight rate at its current range of 3.75% to 4%. The CME Group‘s FedWatch tool on Tuesday showed that 85% of interest rate traders are calling for a rate pause next week. But nearly 75% are predicting a 25-bps hike in December.
Odeta Kushi, deputy chief economist at First American, told HousingWire at MBA Annual that she believes a “resilient labor market has allowed the Fed to increase interest rates because they feel comfortable trying to slow down the economy without tipping it into a job-loss recession. I would classify (labor) as stable as of right now.
“And not to overuse the term ‘low hire, low fire,’ but I do think that there’s something to that,” she added. “We’re in a labor market where employers aren’t necessarily hiring, and they’re also not firing, which means employees are staying put. They’re not switching jobs very often, which is a big trigger for buying and selling a home.”
What should lenders focus on?
Bill North, a senior vice president and home loans market leader at Bank of Texas, a subsidiary of BOK Financial, said in written commentary that he’s maintaining a positive outlook for the coming year.
Although mortgage rates have come in much higher than consensus estimates at the start of the year — and after briefly dropping below 6% in February — North said that markets have started to adapt. This includes attitudes among prospective homebuyers, who have “remained somewhat resilient,” he added.
“Life events such as job changes, family growth and relocations continue to drive home purchases, despite higher borrowing costs,” North said. “Conversely, millions of homeowners hold mortgage rates well below today’s prevailing rates, keeping some buyers and sellers on the sidelines.”
With 2027 on the horizon, North indicated that mortgage professionals should keep Fed policy decisions, inflation readings, consumer confidence readings and housing inventory levels top of mind. “Customers who feel secure about employment and income will move forward with major financial decisions, regardless of the current rate environment,” he said.
Refinances are expected to become increasingly rare in 2027, with the MBA anticipating just $571 billion in refis next year, down 17% from 2026. But Kyle Bass, production business manager at Refi.com, an affiliate of Veterans United Home Loans, said that today’s buyers will be well positioned to capitalize when rates decline meaningfully.
“Even brief improvements in pricing could create opportunities for borrowers with higher existing mortgage rates or those looking to consolidate higher-cost debt,” Bass said in a statement. “For many homeowners, the refinance decision isn’t just about lowering the mortgage rate anymore. It’s increasingly about improving total household cash flow by replacing high-cost revolving debt with a more manageable structure.”