Mortgage Demand Expected to Fall 33% Next Year as Interest Rates Climb

October 18, 2021

Rising interest rates are expected to severely diminish demand for mortgages next year, with one estimate predicting that total origination volume could fall by one-third. 

The forecast comes from the Mortgage Bankers Association (MBA), which expects total mortgage origination in 2022 to total $2.59 trillion, a decline of 33% from 2021’s expected total.  

Economists at the MBA expect the average rate on a 30-year fixed-rate mortgage to rise to 4% next year, almost a full percentage point higher than it is now.

Higher rates will hit refinance demand the highest, as there is little incentive to refinance at an elevated interest rate. Refinance originations are expected to fall 62% to a total of just $860 billion. That follows an estimated decline of 14% this year, following 2020’s record-setting total.

One bright spot in the projections is an expected increase in demand from prospective homebuyers. Mortgage originations for the purpose of buying a home are expected to climb 9% next year, bringing the total to a record-high of $1.73 trillion in 2022.

Though prospective buyers are already facing historically high prices and low inventory, so the prospects of higher mortgage rates may leave potential buyers priced out of the market.

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