Are rates set to slide next year?
Barry Habib isn’t one to shy away from making bold predictions. The CEO of MBS Highway made his latest prediction Saturday, and if it comes true, brokers should prepare for much lower rates in 2026.
Habib (pictured top) gave his breakdown at the National Association of Mortgage Brokers (NAMB) annual event in Las Vegas. He said that, due to a combination of factors, he predicts rates will fall in 2026, and brokers should be ready to act.
“I think you're in for mortgage rates around 5.75%, maybe 5.5% in that range,” Habib said. “Think about what's going to happen to your business. Because here's what ICE says: If you get to 6%, there’s 5 million refis. What are you doing to take advantage of that? What about your clients?”
Inflation and the Fed
He gave a thorough explanation to the assembled group of brokers on why he feels like this scenario is likely. It started with what he believes is an overstated inflation number due to factors he doesn’t think reflect true inflation. He said that actual inflation is closer to the 2.0% goal the Fed has set.
The next factor is that he believes the Federal Reserve will follow through with 25 basis point cuts at each of its last two meetings of 2025.
“Some Fed members are looking at the weakness in the labor market and said, ‘Hey, wake up here. We got to have some more cuts,’” Habib said. “We are going to get another cut coming up at the end of this month. We’re likely going to get another one December 10. I think the Fed funds rate by the end of this year gets to 3.625%. And then we're going to see further cuts coming in 2026, so it will come down further in 2026.”
Habib said the next important step is the Fed's decision to stop the runoff of its balance sheet. He said that it will address the lack of liquidity in the market, which he believes is approaching September 2019 levels.
“What the Fed will now start doing when they officially do this is they'll take them and they'll repurchase,” he said. “What they'll likely repurchase is treasuries. By repurchasing treasuries, this will put us in a position to see an additional amount of buying to the tune of about $25 billion a month in treasuries. As treasuries come down, mortgage rates will follow soon and come down.”
He said that Treasury secretary Scott Bessant told him that they plan to issue more short-term and less long-term Treasuries. He said that makes longer-term maturities more valuable, bringing the rate down.
Another thing that could bring Treasury rates down is changes to banks’ balance sheets when they decide to purchase Treasuries.
“The FDIC and the Fed put a proposal together that will make it easier for banks to buy treasuries,” Habib said. “Right now, banks buy treasuries. They have to take a hit against their capital ratio, their capital account. If he gets this successfully done, banks can do this big arbitrage and then still have their capital intact.
“They can invest in other things and make more money. Therefore, they buy more treasuries. It brings yields down. And (Bessant) told me he thinks this is worth about 40 basis points, which would then bring the 10-year treasury down to 3.5%.”
The final piece of the forecast is for mortgage spreads, which have fluctuated over the last few years, to return to a more historical level of 1.6% to 2%. That would put mortgage rates in the mid-5s, Habib said.
Set a strike rate
There is a reason that top economists and brokers will tell customers not to try to time the market. Habib notes there have been opportunities over the last 30 months for someone to refinance, but those windows were tiny, as the lowest rate drops lasted only a few days.
Out of the eight best refinance chances in that timeframe, four of them were less than three days, and two were just one day.
“If you weren't on top of it, you missed it, which is why you got to establish a strike rate,” Habib said. “The strike rate is really important. What I would do with every customer is go back over the last three years, talk to your customers, and say, ‘Let’s establish a strike rate.’ Because, as you saw in that chart, it’s fleeting. It only lasts a few days.
“Tell them, ‘When we get to that opportunity, I will start calling, messaging, emailing you. I want us to establish it so when it hits, I can save you money.”
Kimber White returned as president of NAMB with a clear mission. He aimed to tackle housing affordability by urging changes to loan-level price adjustments and calling for practical government solutions to help first-time buyers.https://t.co/kEmVyNDXbI
— Mortgage Professional America Magazine (@MPAMagazineUS) October 17, 2025
He said the way you set up the strike rate is to ask the customer how much money they want to save each month and then calculate the rate to achieve that.
“Our job starts the day (they) close,” he said. “Because every day forward, we’re going to be fighting to try and find (them) a lower rate and save (them) money. And we do it with a strike rate.”
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