2025 is in the rearview and the U.S. housing market may be settling into a period of transition. Mortgage rates remain elevated compared to the low levels of the pandemic era, but modest relief in borrowing costs and shifting market dynamics are creating evolving conditions that lenders may want to watch carefully in 2026. Understanding these trends can help loan officers evaluate market signals, lending strategies, and the potential role mortgage insurance (MI) can play within a broader risk-management strategy. 

Mortgage Rates Stabilizing, But Still Elevated

Mortgage rates have cooled from their 2023 peaks, but remain elevated relative to previous years. As of late 2025, the average 30-year fixed mortgage rate was around 6.2%, near the lowest levels seen during the year, but still above long-term historical norms¹.  Industry forecasts suggest that mortgage rates may remain in the mid-6% range through 2026, with only modest downward pressure expected¹. Forecasts from several leading industry analysts show average 30-year rates clustering between roughly 6.0% and 6.4% next year¹. 

What lenders may want to watch: With rates remaining elevated, borrowers may be more focused on monthly payments and overall affordability. Loan officers may benefit from addressing pricing assumptions earlier in the process to help set expectations and reduce surprises later on.  

Modest Home Price Growth

Forecasts from major housing analysts indicate that home price appreciation will be moderate in 2026, following a period of slower growth in 20253. Zillow’s economic research projects general home value increases of around 1% over the course of 2026, while other data suggest a modest uptick in sales activity as affordability improves slightly⁴. This gradual warming is driven in part by national income growth outpacing home price growth in some markets.³ 

What lenders may want to watch: Stable or moderate price growth may create more predictable home valuation expectations for borrowers, potentially reducing sticker shock in purchase transactions. Loan officers should consider balancing expectations around price growth with current rate environments, offering data-driven context rather than broad predictions. 

Shifts in Buyer Activity and Inventory

Amid high rates and affordability challenges, the housing market has shown signs of renewed buyer interest. Many forecasts point to slight increases in annual home sales volumes in 2026 compared with annual 2025 estimates³. Modest easing in borrowing costs and incremental inventory improvements are expected to bring more buyers back into the market, particularly in segments where entry-level and relatively lower-priced housing options are more available⁴. This dynamic may be most relevant in markets with relatively high affordability or growing employment bases.  

What lenders may want to watch: Loan originations may see incremental growth as inventory loosens and buyers reengage in 2026. Loan officers should consider preparing to address regional variations in affordability and inventory, with specific local market intelligence to help support borrower conversations. 

Exploring Mortgage Insurance Strategically

Mortgage insurance may help enhance accessibility to credit for borrowers who lack large down payments. Private MI may allow borrowers to access financing options with down payments as low as 3%, while also helping lenders and broader market participants with risk mitigation strategies⁵. Data shows that MI remains a common feature in conventional mortgage lending for purchase loans, particularly for first-time buyers and lower down-payment borrowers⁵. 

What lenders may want to watch: MI may continue to play a role in supporting borrower access by enabling financing that might otherwise be unattainable. Loan officers may find it useful to be familiar with MI products when structuring loan options. 

Risk Context: Broader Economic Considerations

While mortgage rates and home prices are considered key housing market signals, broader economic variables such as labor market stability and inflation expectations may also factor into mortgage pricing dynamics. Rate forecasts and housing outlooks often cite the interplay between Federal Reserve policy and Treasury yields as another determinant of mortgage pricing dynamics⁶. For lenders, analysts of this environment suggest a cautious optimism: conditions may be stabilizing and dramatic shifts are unlikely in the near term.  

What lenders may want to watch: Macroeconomic releases related to inflation, income growth, and borrowing costs may continue to shape housing and lending conditions. Staying aware of these dynamics can provide helpful context for understanding borrower expectations and market activity.  

Looking Ahead In 2026 

The housing market that loan officers will navigate in 2026 may be one of moderation rather than disruption. Mortgage rates are expected to remain in a familiar range, price growth is likely to be modest, and buyer activity may slowly rebound. Within this context, MI remains a consistent tool to enhance accessibility, especially for buyers without substantial savings or those who may choose a smaller down payment to preserve funds for maintenance or renovation needs. 

Loan officers who ground conversations in credible data and tailor advice to each borrower’s financial context may be well positioned to help clients move forward confidently in 2026. 

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