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Volatility is the word of the year. Between the conflict in Iran, a new Fed chairman, approaching midterm elections, and a stock market riding an AI-driven high, the economic backdrop for mortgage lending has rarely felt this unsettled. 

iEmergent's updated forecast, published in our flagship platform Mortgage MarketSmart, offers credit union lenders an up-to-date read on where origination volume is headed through 2027.

The Economic Picture Has Shifted

In our Q1 2026 forecast update, released before preliminary HMDA data for 2025 became available, we projected $1.94 trillion in combined purchase and refinance originations. Preliminary HMDA data later put the actual total at $1.957 trillion. The purchase forecast came in 0.9% above the actual figure, while the refinance forecast came in 4.5% below it. Overall, the variance between projected and actual volume stayed narrow. 

Several key indicators have shifted since last quarter, each with implications for member lending strategy.

Growth is holding up better than expected. Real GDP rose 2.5% year over year in the first quarter on strong business investment and solid consumer spending. We now expect year-end 2026 GDP growth to come in above 2%, even accounting for the oil shock tied to the Iran war. Stimulus from the One Big Beautiful Bill Act is projected to add roughly a point to GDP this year, and AI-driven business investment shows no signs of slowing.

The labor market is proving resilient. Unemployment ticked down to 4.3% in April and May, with modest but steady job growth. The slowdown in labor conditions we previously expected has been pushed back into 2027.

Rates are moving up, not down. The 30-year fixed rate mortgage has climbed nearly 50 basis points since late February, driven by inflation from the oil shock, wider federal deficits tied to war spending, and stronger-than-expected economic data. Just a month ago, many market watchers expected the Fed to cut rates. Now, holding steady looks more likely, with some sentiment building for a hike. We expect continued upward pressure on long-term rates in the near term, though rates could ease in 2027 if growth slows. We don’t expect the Fed to move the federal funds rate for the rest of this year.

Inflation is creeping higher. The Fed's preferred core PCE (personal consumption expenditures excluding food and energy) measure hit 3.3% in April, the highest reading since October 2023. New Fed Chairman Kevin Warsh reportedly favors the "trimmed mean" PCE measure, which stood at a lower 2.35% in April but has also begun to rise. We expect energy prices to remain the biggest inflationary pressure in coming months, with effects likely to linger even after the conflict ends.

Housing Supply and Demand Remain Out of Sync

Affordability has worsened with rising rates but remains better than for most of the past four years, though still below the long-run average. Home price appreciation has flattened and inventory has improved from the scarce levels of recent years. Even so, sales have stayed sluggish for reasons credit union lenders might recognize:

• The lock-in effect persists. Members who locked in 3% to 4% mortgages during the pandemic face rates near 6.5% on a new loan, keeping many out of the market.
• Supply is mismatched. New construction has skewed toward high-end homes, where supply now exceeds demand. Starter homes stay scarce, a particular obstacle for first-time buyers. 
• Builders are pulling back. Facing an oversupply of high-end inventory and higher rates, builders have slowed new construction to its lowest pace since 2020.

Modest Growth, Uneven Mix

iEmergent trimmed its forecast from last quarter, cutting 2026 and 2027 purchase volume projections by 7% and 6% respectively, and refi projections by 4% and 3%. The adjustments reflect the higher rate environment.

With those adjustments, we forecast:

• 2026: $1.40 trillion in purchase originations (up 4% from 2025) and $834 billion in refinances (up 38%), with most refi activity concentrated in the first four or five months of the year on applications locked in before rates rose. Total first-lien originations: $2.235 trillion, up 15% from 2025.
• 2027: A modest gain in purchase volume and a nearly flat refi segment, bringing total originations to $2.307 trillion — just a 3% increase over 2026.

Here's a long-term chart with our updated forecast numbers:

And here's the table of our forecasts, along with year-over-year changes:

What This Means for Credit Unions

Refinance volume looks strong for 2026 but is front-loaded, so the window to serve rate-locked members may close faster than expected. Purchase volume growth remains modest, and the mismatch between available inventory and first-time buyer demand keeps first-time homebuyer programs and down payment assistance options relevant.

With rate volatility likely to continue, staying close to forecast updates like this one can help credit unions time staffing, marketing, and product decisions more precisely.

If you're interested in forecasts like this one, stay tuned to our iEmergent Insights.