Economic growth is expected to slow in 2026 and remain below trend for several years as higher interest rates and lingering inflation pressures weigh on the U.S. economy, according to the Mortgage Bankers Association’s December Economic and Mortgage Finance forecasts.
MBA economists Mike Fratantoni, Joel Kan and Judie Ricks wrote that the forecasts show 2025 GDP growth of 1.6% and a 35% chance of a recession over the next 12 months. Growth is expected to remain in a narrow range of about 1.5% to 1.7% from 2026 through 2028, the forecast said.
The outlook comes amid mixed economic signals. The Federal Open Market Committee cut its benchmark federal funds rate by 25 bps at its December meeting, but the decision was contested: one governor voted for a larger cut, while two members dissented in favor of no change.
“The projections published from this meeting show the Committee does not see a clear path,” the economists included in their commentary.
Inflation remains above the Federal Reserve’s target, while employment data released in mid-December showed payroll growth has largely stalled since April. The unemployment rate rose to 4.6% in November, up from 4.4% in September, and MBA expects it to edge higher to 4.7% in the first half of 2026.
Mortgage rates forecast
The economists expect mortgage rates to stay in a narrow range throughout 2026, which could limit a housing rebound and keep home prices largely flat.
“Mortgage rates have inched higher over the past week, slowing the pace of refinance applications at a time of year when the purchase market typically slows sharply. Our forecast is for mortgage rates to stay within a narrow range over the next few years, between 6% and 6.5%. This forecast becomes more likely as the Fed reaches the end of their cutting cycle next year,” the economists wrote in their commentary.
Inventory and home prices
In the housing market, rising inventory in many regions is giving buyers more choices and helping cool price growth. MBA expects national home prices to be essentially flat over the forecast horizon, with growth slowing to about 1% by the end of 2025 and turning slightly negative in late 2026 as demand softens.
Single-family mortgage originations are projected to rise modestly in 2026 to $2.2 trillion, up from $2.05 trillion in 2025. Purchase originations are expected to total $1.46 trillion as existing-home inventory improves and affordability gradually recovers.
Refinance originations are expected to increase to $737 billion from $694 billion.
The MBA also noted that it expects home prices to “stagnate: at the national level over the forecast horizon. The economists expect growth to slow to the 1% range by the end of 2025 and dip “slightly into negative territory” in late 2026.
Commercial and multifamily lending is also expected to strengthen. MBA forecasts total commercial originations of $784 billion in 2026, up from an estimated $637 billion in 2025, driven by refinancing activity and property acquisitions. Multifamily originations are projected to climb to $393 billion in 2026.