Mortgage forecasts reset lower amid higher rates

Mortgage lenders may be heading into a tougher stretch as higher interest rates work their way through the U.S. economy, and the slowdown is already showing up in preliminary financial results for the third quarter of 2026. “If we continue at these rate levels, origination is going to be a lot lower,” said Kevin Heal, managing director and senior finance analyst at Argus Research. “Compared to the second quarter, it could be down at least a bare minimum 5% in the third quarter.” Pennymac Financial Services offered an early example of the shift. The company reported preliminary funding of $16.6 billion for July and August after posting $34.9 billion in the second quarter — pointing to roughly a 28% drop in monthly production. PennyMac also expects its production revenue margin to land between 75 and 85 basis points, after reporting 77 bps in the second quarter. “With mortgage rates up 50 basis points from June 30th, pretax income will be lower than 2Q2026 primarily due to a decline in pull-through adjusted lock volume,” PennyMac said in a Securities and Exchange Commission (SEC) filing on its production segment. Rates began climbing in the second quarter, even before the Federal Res...