The Federal Open Market Committee's initial take on the economy in 2026 may temper NMN-surveyed mortgage professionals' view that rates will fall fast and far enough to generate significant revenue gains this year.
Monetary policymakers weighed the balance of risks associated with a softer market vs. inflation in their
"Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated," the FOMC said in its statement Wednesday, noting that its majority decision was opposed by two dissenters who sought 25 basis point cuts.
With the Fed on hold, the long-term rates most mortgages have are less likely to trend downward near term, depending on other drivers like
"The Fed's holding pattern clouds the picture for mortgage rates," Eric Orenstein, senior director of Fitch Ratings, said in a statement on Wednesday.
Policy actions like expanded authority for government-sponsored enterprise
"While rate cuts matter, the biggest wildcard this year is policy," Bill Banfield, chief business officer at Rocket Mortgage, said in a statement on Wednesday.
Rate cuts, revenues and the industry's hot take
The Fed's decision to pause is in line with what the biggest concentration (31%) of respondents to an exclusive NMN survey were anticipating at the end of 2025, which was just two short-term rate cuts this year. Others anticipated three reductions (27%) or four cuts (23%).
Only 13% anticipated that the majority (five of the eight) Fed meetings during the year would end with a rate cut, so Wednesday's developments weren't entirely at odds with expectations. Some have anticipated there will only be one cut (5%) or none at all (1%).
While surveyed mortgage professionals indicated they didn't expect the FOMC to continue cutting rates at every meeting, a large concentration of them (40%) anticipate eventually seeing enough reductions to generate "significant" revenue gains this year.
Survey respondents may be acknowledging that their outlook for a drop in financing costs strong enough to produce significant gains outpaces broader forecasts in putting falling rates at the top of their list of developments that might surprise the market this year.
More than a quarter or 28% of mortgage professionals filling out the survey listed a drop in interest rate as their "hot take" on the outlook for this year.
The Trump administration's broader focus on low rates, which the independent Fed has resisted, may be one reason for this view. Some political forecasts suggest the Trump administration may get more of an upper hand this year due to turnover at the Fed.
"There will be a new Fed chair," said Dan Habib, chief revenue officer at
The broader outlook for housing finance
Whether rate drops will result in "significant" revenue gains for housing finance will depend not only on rates but other aspects of the broader economy, with both of these exerting influence on each other.
Many NMN survey respondents anticipate low rates and other developments will bolster the housing part of the equation even though there are signs of concern about affordability pressures
The majority of mortgage professionals surveyed consider improvements in
The Mortgage Bankers Association has forecast the average 30-year conforming mortgage rate will remain in a narrow range between 6% and 6.5%, with a mild lift for housing.
"We expect that this level of rates will help support a somewhat stronger spring housing market than last year, but not a breakout year," MBA Chief Economist Mike Fratantoni said in a statement issued on Wednesday.
When it comes to the outlook for how much consumer financing for the supply of homes could grow, the impact of rates has some more nuance. For one, it's often noted that many existing borrowers still have low rates from the pandemic they don't want to give up to get a new loan.
However as the pandemic has receded, outstanding borrowers with low rates have too, and the population with higher rates has grown notably, Rocket Mortgage Chief Financial Officer Brian Brown told Orenstein in an online "fireside chat" earlier this week.
"You don't need rates to come down that much to make a big difference," Brown said.
While the FOMC is just one influence on mortgage rates, consumers have been highly reactive to it recently, according to Brown.
"The number of inbound calls we get now on a Fed meeting date or when there's news about Powell or rate cuts is really substantial," he said.
What the rate outlook means for servicing
Another nuance in housing finance is that while the production of new loans benefits from low rates, they create some challenges for the servicing side of the business that has responsibility for payments, delinquencies and foreclosures.
Optimism in NMN's survey may reflect the fact respondents are primarily origination-focused and want to see rate cuts. Also servicing still could see upsides, one of which is that it offers protection for entities that are both originators and servicers in the event a rate drop does not pan out.
"If rates are higher for longer, we can continue to collect those servicing cashflows and do it at a very efficient clip," said Brown, whose company recently acquired megaservicer Mr. Cooper.
Additionally, in a low-rate environment, servicing is in a position this year to offer customer contact advantages to lenders.
"If rates do cooperate and start ticking down a little bit, man, there's no one better positioned to do rate-and-term refinances and capture more of those purchase transactions," Brown said.
Views on economic factors in rate decisions
Federal Reserve Chairman Jerome Powell's tension with the Trump administration over monetary policy has included differences in how they view housing affordability strains, with the former considering it one factor in the broader economy and the latter calling it a reason to lower rates.
"Consumer spending has been resilient, and business fixed investment has continued to expand. In contrast, activity in the housing sector has remained weak," Powell said on Wednesday.
"It would be hard to restore the credibility of the institution if people lose their faith that we're making decisions only on the basis of our assessment of what's best for everyone, for the wide public, rather than trying to benefit one group or another," he also said.
The broad risks Fed officials cited Wednesday as part of their reasons to pause rate hikes are similar to those industry survey respondents considered likely in a macroeconomic portion of the survey.
Stagflation, in which lower rates fail to quell rising consumer prices, is something the majority of 51% of NMN survey respondents said is probably going to happen this year and another 13% think definitely will occur.
"The consumer is filling out surveys that sound really negative and then spending," Powell said on Wednesday.
The majority of respondents also indicated they anticipate a US recession either is likely to occur or definitely will, with 35% in the first camp and 20% in the second. A greater percentage considered a global recession likely or a certainty at 41% and 21%, respectively.
A recession could be a reason to lower rates but also could hurt demand if it was too extreme. Rate stimulus is aimed at remedying economic pressures in a recession but does not always work as intended. The Trump administration has argued that Powell has been too slow to lower rates and risks this. Powell has said the Trump administration's approach could fuel inflation.
The majority of survey respondents indicated that stagflation or either a global or domestic recession would be negative or very negative, even though they also consider the housing and rate outlook positive or very positive for their business.
The net optimism may reflect perceptions that lower rates will likely be effective enough to address macroeconomic risks as intended and bolster originations, resulting in a net positive outlook for the year.
But too much weakness in the economy, particularly if inflation persists, could hamper loan performance and lending, both due to a likelihood of less demand and potential tightening in mortgage requirements aimed at ensuring approved borrowers have the ability to repay.
The Fed's decision on Wednesday reflected a view on the part of the majority of the committee that the inflationary risks have most recently outweighed recessionary ones.
"The economy has once again surprised us with its strength," Powell said.
