Analyst offers hope for future rate improvement
The last couple weeks haven’t exactly been full of good news for mortgage brokers and the mortgage industry.
Just as mortgage rates dropped back into the high-5s and appeared poised to stay there for a bit, war in Iran sent Treasuries soaring, with rates following back into the mid-6s.
Meanwhile, AI-driven job losses combined with a softening economy are giving homebuyers pause about jumping into the market this spring.
So, is there any good news on the horizon? The first thing that could help improve things would be an end to the conflict in the Middle East, allowing for oil markets to stabilize and reducing inflation. But there are other possible ways that mortgage rates could resume their slide back toward the 5s, according to one analyst.
Eric Hagen (pictured top) is the managing director and mortgage and specialty finance analyst at BTIG. He said the Trump administration’s order for Fannie Mae and Freddie Mac to buy government bonds helped, but there isn’t an opportunity for another large bond purchase. So it’s hard for him to see what can cause spreads to tighten further.
“That's where we struggle with this whole space right now,” Hagen told Mortgage Professional America. “It's hard to say what would actually catalyze mortgage spreads to tighten, because Trump has already done his thing. He's said he's already directed the agencies to buy a bunch of MBS, which, all else equal, would be that catalyst event.”
Banks in the picture
One of the things that could help improve mortgage rates is the return of banks to mortgage lending, especially in the wholesale channel.
That process took another step on Thursday, when the Federal Reserve announced it would push ahead with Michelle Bowman’s plan to change banking regulations to encourage more mortgage lending.
Many experts believe that a surge in bank mortgage lending could be both good for brokers and for the wholesale channel. It could be good for consumers as well, as more competition and liquidity could mean better rates. Hagen isn’t sure yet how much it would help, but it could help some.
“We've heard that banks are getting back into the mortgage market slightly, not in a meaningful way, but on the margins,” Hagen said. “That could help tighten the spreads a little bit. Banks are typically a little bit more competitive with their rates versus the nonbanks that we cover, but not meaningfully. It's not like they're going to be offering meaningfully better rates.”
The encouraging thing that Hagen is seeing so far is that credit conditions in the market continue to be strong, even with the market headwinds that have derailed rate drops early in the year.
“We still feel like the credit conditions are pretty healthy in the market, for the most part,” he said. “A tightening of credit, alongside some of the volatility that we just talked about, isn't really what we're seeing. Sometimes you see volatility coming up and rates backing up, and lenders tightening their standards. We're not really seeing that yet.”
Fannie and Freddie conservatorship
One other idea Hagen said could improve mortgage rates is the release of Fannie Mae and Freddie Mac from government conservatorship.
The talk of changes to the government-sponsored entities (GSEs) was one of the biggest stories of 2025. However, it has largely moved on to the back burner due to other priorities in the government.
Hagen thinks the ruling against President Trump’s tariffs by the Supreme Court could delay any changes to Fannie and Freddie.
“What we do feel like, and we don't hear enough people talking about this, is with the GSE recap and release, and this idea of relisting them eventually,” Hagen said. “We feel like the tariff stuff throws some cold water on that opportunity simply because I think it highlights the limits of the president's powers.
“I feel like the GSEs are almost more politically sensitive than tariffs, believe it or not. We would be a little surprised that there wasn't some SCOTUS backlash on a potential relisting of the GSEs.”
If that plan does move back to the front burner at some point in 2026, Hagen thinks it could help lower mortgage rates.
“We want to see them get released from conservatorship,” he said. “We want to see value creation in the GSEs. We feel like the GSEs are totally connected to lower mortgage rates, and their exiting conservatorship is 100% tied to the opportunity to lower mortgage rates.”
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