Mortgage lenders should not expect challenging market conditions to ease for the foreseeable future, according to updated housing forecasts published by the Mortgage Bankers Association (MBA) on Friday.

The MBA projects the federal funds rate will remain within its current range of 3.5% to 3.75% through the end of 2026, implying that Federal Reserve Chair Kevin Warsh will not pursue rate hikes during the final three Federal Open Market Committee meeting of the year in September, October and December.

However, a pair of quarter-point rate hikes are still on the docket for next year, the trade group believes, matching its forecast from July. One hike is forecast to occur in the first quarter of 2027, and the second hike in the third quarter.

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That would put the Fed’s benchmark rate in a range of 4.25% to 4.5% by the end of next year, by MBA estimates. By contrast, Fannie Mae’s updated August forecast shows the fed funds rate ending 2026 and 2027 at 3.6%, within its current range.

The MBA also raised its outlook for 10-year U.S. Treasury yields, which have surged in recent weeks. The association’s economists now predict 10-year yields will end 2026 and 2027 at 4.7%, an upward revision from the group’s 4.5% estimates from July.

Fannie Mae also raised its projections for the 10-year in its August update. Its economists predict the 10-year Treasury will end 2026 at 4.8% and reach 4.9% by the end of 2027, up from prior estimates of 4.5% and 4.6%.

Rate projections up, refinance outlook down

Sharp increases in forecasted 10-year Treasury yields, to which mortgage rates are commonly benchmarked, also shifted the MBA’s mortgage rate forecast higher.

Average mortgage rates for 30-year fixed-rate loans are projected to hover around current levels during the rest of 2026, averaging 6.7% through the fourth quarter and the duration of 2027.

The upward revision is considerably higher than the MBA’s July forecast, which called for 30-year rates averaging 6.5% through the end of this year and next. That revision has notable implications for one- to four-family mortgage origination volumes.

The MBA lowered its projections for total 2026 refinance production by 4.5% in the August forecast, to $713 billion from the prior estimate of $747 billion. Forecasts of 2027 refinance production were decreased by 4.3%, from $684 billion to $655 billion.

On the purchase side, however, production volumes were revised higher in August to $1.43 trillion for 2026, about 1.3% higher than July’s projections of $1.41 trillion. For 2027, July projections of $1.51 trillion in purchases were revised 1.1% lower to $1.49 trillion next year.