Market analyst urges brokers to be ready for a refinance surge
Despite a gradual decrease in mortgage rates throughout the second half of 2025, rates never reached a level where the often-forecast “refi boom” really took hold.
Many brokers reported an uptick in refinances, both on the consumer and commercial side, late in the year.
Most forecasts show a continued slide in rates into the new year. However, if Thursday’s CPI report is to be believed and inflation is cooling, could this, combined with continued Fed cuts, finally light the fuse for a true refinance surge in 2026?
Eric Hagen (pictured top) is the managing director and mortgage and specialty finance analyst at BTIG. He believes there is a tremendous amount of pent-up demand waiting for the right mortgage rate to move. He urges brokers and lenders to be ready for a surge.
“If mortgage rates are lower and they drop, how prepared are these originators going to be to refi all these borrowers?” Hagen told Mortgage Professional America. “We think there's a lot of capacity in the system. I mean, Rocket is super aggressive, and we expect them to handle their portfolio very well, but the market's huge.”
Investors ready to go
Hagen said one area that should benefit from a surge in refinances is the non-QM space. Because there has been an increase in self-employed and gig workers since the pandemic, many of them will have specialized loan needs in a future refinance.
“All these self-employed borrowers that got a loan over these last few years, they need the originators to give them another loan,” Hagen said. “If rates are lower, these higher coupon loans get kind of like, pushed to the side or ignored in exchange for the lower hanging fruit that an originator can accomplish.”
In addition to borrowers who got loans at steep discounts during the pandemic, Hagen urges brokers not to forget those who obtained loans in the high-rate environment of the last three years.
“There's all this pent-up demand energy in the mortgage market,” he said. “You can almost feel it. There are all these low-coupon borrowers from back in the pandemic, and then there are all these higher-coupon loans that were originated over the last three years. The structure of the market, we don't think, has ever really looked like this, where it's barbell in this manner. We think investors want to be on board for that refi opportunity.”
One way that brokers and lenders will be better equipped to handle a wave of refinances is the continued adoption of new technologies. Hagen would like to see more consistent adoption of new technology across the board.
“We think the application of AI in our space has tons of room,” he said. “I can't think of a business that's more laden with paper pushing and process-oriented stuff. It's just ripe for AI to replace the humans who do a lot of that stuff. It hasn't really been talked about because technology adoption in the mortgage industry is super fragmented, so nobody's really focused on this in a material way.
“If the costs are getting removed from the origination and servicing process, that could be really material for our industry. We just haven't seen it come to fruition yet. We think the AI focus in our space is super interesting. It may be a little bit less connected to rates, but that's in some ways what makes it so interesting.”
Future of the GSEs
There is still much debate over what will happen, if anything, with Fannie Mae and Freddie Mac in 2026. There has been talk throughout the year that major changes were coming to the GSEs, ranging from removal from conservatorship to the creation of an IPO and even merger rumors.
Hagen said that whatever happens, markets are closely watching how the government will get Fannie and Freddie there and what the fallout will be.
“The GSEs and the relisting of the GSEs are obviously a hot topic,” he said. “We don't really expect it to drive a lot of change in the industry, but it will be focused upon, and the read-through will be a lot of people asking about mortgage rates and what the impact is. Even though we think the punchline is low-impact, we still think a lot of folks, a lot of generalist investors, are just going to get tuned in when the GSEs get relisted.”
Sam Williamson of First American says the Fed will likely proceed cautiously in 2026, with one or two rate cuts expected despite leadership changes. Policy remains data-driven, balancing inflation and employment. Read more and share your thoughts.https://t.co/2nyZa0eFbW
— Mortgage Professional America Magazine (@MPAMagazineUS) December 16, 2025
As far as the Fed and rates in 2026, Hagen believes that while the market may anticipate some future rate cuts, there could be room for further rate reductions, which could finally bring the long-promised refi boom.
“There's 50 basis points of cuts priced into the curve, which seems rational to me,” Hagen said. “Mortgage rates are more likely to ease a little bit more if rates are getting cut. The government is going to be issuing a lot of debt next year and well into the future, and so that maybe gives us a little bit of pause that rates have a lot of room to drop.”
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