Quarterly mortgage market summary
Mortgage securitizations increased 19% in the first quarter (Q1) 2025 on a year-over-year basis but remain suppressed as a result of persistently high interest rates and general pressure on the affordability of new homes. Securitization volumes of new agency mortgages (Fannie Mae, Freddie Mac, and Ginnie Mae) were $246 billion for Q1, based on estimates from Milliman M-PIRe Securitization and Valuation Software.
Mortgage lenders struggled to maintain profitability during the quarter, with the average lender losing $28 for each loan originated in Q1 2025.1 Although Q1 is usually the seasonal low for mortgage production, it is also the seasonal high for gain on sale revenue margins, enabling improved economics relative to previous quarter results.
Despite the Federal Reserve’s quarterly report indicating a growing strain on consumers as aggregate delinquencies increased along with the total amount of consumer debt accumulated,2 disposable personal income increased annually at 1.5%,3 just shy of the current annual 2.4% pace of inflation.4 Agency mortgage loan delinquencies edged up year-over-year, increasing from 3.94% in Q1 2024 to 4.04% in Q1 2025.5
We anticipate similar origination trends for the remainder of 2025 as interest rates and inflation remain rangebound while the U.S. focuses on its tariff and trade priorities. The constrained lending environment will continue to exert pressure on mortgage lenders; however, if the second half of 2025 is consistent with the second half of 2024, we anticipate that most lenders will still recognize a small net profit for the second half of the year.
Purchase and refinance origination trends
Based on agency securitization data using Milliman M-PIRe, single-family mortgage originations rose 19% year-over-year from $207 billion in Q1 2024 to $246 billion in Q1 2025. Purchase mortgages increased 10% year-over-year whereas refinance activity increased 64%. For the same period, the 30-year mortgage rate increased seven basis points, averaging 6.82% in Q1 2025.
Figure 1: Mortgage securitizations and the 30-year mortgage rate
Although mortgage rates are higher, the Primary-Secondary (30-year mortgage to 10-year treasury) spread is down 22 basis points year-over-year, from 259 basis points in Q1 2024 to 237 basis points in Q1 2025.6 This downward trend in the Primary-Secondary Spread has continued since the beginning of 2024, providing some relief for mortgage rates.
Figure 2: The primary-secondary spread
Existing home sales in Q1 2025 were flat year-over-year whereas sales of new homes were down 4%.7 It is worth noting that although there is a downward trend in new home sales, we also observe a rise in new home inventory, which has increased 8% since Q1 2024. Both single-family housing permits and starts are down 4% and 5%, respectively, indicating potential headwinds for future new home sales.
Figure 3: Existing and new home sales
Figure 4: Single family starts
According to the Mortgage Bankers Association (MBA), applications to refinance a home were up 43% from Q1 2024 to Q1 2025. Applications for purchase were up 2%.8 The increase in refinance applications is being driven by the continued decline in the 30-year mortgage rate whereas the increase in purchase applications is being driven by the additional inventory and, to a lesser extent, the declining 30-year mortgage rate.
Figure 5: MBA purchase indices
Figure 6: MBA refinance application indices
Mortgage lenders and their financial performance
In Q1 2025, mortgage lenders lost $28 for every loan originated in the quarter.9 This marks the tenth time in the past 12 quarters where loan origination profitability was negative on average for mortgage lenders. Although revenue margins on mortgage loans continue to observe a strong seasonal effect, with Q1 originations consistently demonstrating the strongest margins, the overall revenue margins continue to trend up.
Figure 7: Mortgage lender profitability
Consumer health and the lending environment
The overall economy remains relatively strong with job gains throughout Q1 2025 and the unemployment rate ending the quarter at 4.2%.10 Unfortunately, total household debt continues to increase, with the total consumer debt load rising 2.9% from Q1 2024 to Q1 2025.11 The additional stress of debt and the end of deferrals on student loan payments may be driving increasing delinquencies in all agency mortgage portfolios. In total, agency mortgage loan delinquencies edged higher, increasing from 3.94% in Q1 2024 to 4.04% in Q1 2025.
Figure 8: Mortgage delinquencies
In Q1 2025, bank lenders reported net tightening of credit standards on nonconventional loans while those same bank lenders loosened credit standards for conventional mortgage loans.12 This trend has been similar over the last several quarters, following a period of significant tightening by banks in 2023 and early 2024.
Figure 9: Percentage of lenders tightening credit
On a positive note, in Q1 2025, consumers’ expectations regarding inflation in five years reached their lowest level since the beginning of 2022.13 These readings, however, were collected prior to tariff policy changes.
In addition, the continued upward trend of home prices added net worth to consumers’ balance sheets. In Q1 2025, the FHFA Home Price Index was up 4.0% year-over-year.14
Figure 10: FHFA home price index
Looking ahead
For the remainder of 2025, MBA, Moody’s, and Fannie Mae are forecasting continued growth in mortgage originations. MBA is the most optimistic with its expectation that refinance originations will run at approximately $184 billion per quarter. Moody’s and Fannie Mae, however, anticipate quarterly levels averaging $107 and $132 billion, respectively. The three forecasts are closer to each other for purchase volume, each anticipating originations averaging $378 billion quarterly. That puts annualized mortgage production dollar growth at 13% from 2024 to 2025.
These production forecasts are heavily dependent on mortgage rates. Unfortunately, the future path of rates is extremely uncertain. MBA anticipates that mortgage rates will end the year at 6.7%, higher than they finished 2024, whereas Fannie Mae sees rates dropping to 6.5% by year-end, slightly below where they finished 2024.
1 Mortgage Bankers Association. (2025, May 16). Mortgage bankers performance report - quarterly and annual. Retrieved on August 26, 2025 from https://www.mba.org/news-and-research/newsroom/news/2025/05/16/imbs-report-slight-production-losses-in-first-quarter-of-2025.
2 Center for Microeconomic Data. (2025, Q2). Household debt and credit report. Federal Reserve Bank of New York. Retrieved on August 14, 2025 from https://www.newyorkfed.org/microeconomics/hhdc.html.
3 Bureau of Economic Analysis. (2025, July 31). Personal income and outlays, June 2025. Retrieved on September 26, 2025 from https://www.bea.gov/news/2025/personal-income-and-outlays-june-2025.
4 St. Louis Federal Reserve. Disposable Personal Income. Retrieved on August 27, 2025 from https://fred.stlouisfed.org/series/DPI.
5 Moody’s Analytics. (2025). Data Buffet. Retrieved on August 27, 2025 from https://www.economy.com/products/tools/data-buffet.
6 Federal Reserve Bank of St. Louis. 10-Year Constant Maturity on August 27, 2025 from https://fred.stlouisfed.org/graph/?g=1KFLF.
8 Mortgage Bankers Association, op. cit.
9 Mortgage Bankers Association, op. cit.
10 Economic News Release. (2025, April 4) Employment situation summary. U.S. Bureau of Labor Statistics. Retrieved on August 27, 2025 from https://www.bls.gov/news.release/archives/empsit_04042025.htm.
11 Center for Microeconomic Data, op. cit.
12 Moody’s Analytics, op. cit.