Industry Overview - The mortgage REIT (mREIT) industry faced volatility in 2025 due to macroeconomic uncertainty, with the average rate on a 30-year fixed-rate mortgage starting at 6.72% and remaining in the upper-6% range for most of the year [1] - By December 2025, the Fed implemented a 25-basis-point rate cut, reducing the average mortgage rate to 6.21%, down from a peak of 7.05% in January 2025 [2][9] - The mREIT industry showed signs of recovery as interest rates stabilized and economic conditions improved, with expectations for further declines in mortgage rates in 2026 [3][4] Market Dynamics - U.S. economic growth is projected to accelerate in 2026, with moderating inflation and decreasing unemployment, contributing to lower mortgage rates and favorable refinancing activity [4] - Mortgage spreads have been narrowing as volatility decreases, which is expected to improve book values for mREITs as asset prices rise [5] Investment Opportunities - Investors are encouraged to consider mREIT stocks such as Two Harbors Investments Corp (TWO), NexPoint Real Estate Finance (NREF), and Ellington Financial Inc. (EFC) for potential strong returns in 2026, given their attractive dividend yields and growth prospects [3][6] - The selection of these stocks was based on criteria including an expected earnings growth rate of over 5% for 2026 and a dividend yield exceeding 10% [7] Company Insights Two Harbors Investments Corp (TWO) - TWO's portfolio is primarily composed of residential mortgage-backed securities (RMBS) with a 71.1% exposure to Agency RMBS as of September 30, 2025 [10] - The company reported a net interest loss of $63.5 million for the nine months ended September 30, 2025, an improvement from a loss of $122.8 million in the prior year [12] - TWO's current dividend yield is 12.01%, and it has raised its dividend once in the past five years, with earnings estimates suggesting year-over-year increases of 114.5% for 2025 and 6.7% for 2026 [12][13] NexPoint Real Estate Finance (NREF) - NREF focuses on originating and investing in first mortgage loans and has seen its net interest income rise to $36.1 million in the first nine months of 2025, up from $6.4 million the previous year [18][19] - The company has a current dividend yield of 13.73% and has increased its dividend three times in the past five years, with earnings estimates indicating year-over-year increases of 2.2% for 2025 and 8.1% for 2026 [19] Ellington Financial Inc. (EFC) - EFC invests in a diverse range of financial assets, including residential and commercial mortgage loans, and has a strong momentum in its securitization platform [21] - The company maintains a disciplined approach to risk management, with a current dividend yield of 11.30% and three dividend increases in the past five years, alongside earnings estimates suggesting year-over-year increases of 25.3% for 2025 and 1.6% for 2026 [23]

Core Insights - The average rate for a 30-year fixed mortgage has decreased to 6.19%, down from 6.27% the previous week, marking the lowest level in over a year [10][12] - The decline in mortgage rates is attributed to expectations of a Federal Reserve rate cut and signs of a cooling economy [11][12] Mortgage Rate Trends - The 30-year fixed-rate mortgage rate was above 7% at the start of 2025, but has now dropped nearly a full percentage point [1] - Economists predict that mortgage rates may continue to decline slightly through 2026, but will likely remain within the 6%–7% range [5][6] Housing Market Impact - The decrease in mortgage rates, combined with softening home prices, is improving affordability for buyers [8] - In September, the typical home sold for 1.4% below asking price, the largest discount for that month since 2019 [8] - Sales of existing homes in September rose at the fastest pace in seven months, indicating a positive response from buyers [8][9] Economic Context - The sharp drop in mortgage rates is notable amid an ongoing federal government shutdown, which has limited the release of most economic data [3] - Freddie Mac continues to publish its weekly mortgage survey despite the shutdown, reflecting its ongoing role in the mortgage market [3]

Core Insights - Mortgage demand surged as borrowers responded to a drop in mortgage rates, with applications for home loans increasing significantly [2][5][6] Group 1: Mortgage Rate Trends - The 30-year fixed mortgage rate fell to 6.49%, marking the lowest level since October of the previous year [2][4] - This decline in rates has prompted a notable increase in mortgage applications, with a 9% rise compared to the previous week [2][5] Group 2: Borrower Behavior - The recent drop in mortgage rates has led to the highest level of borrower demand since 2022, with both purchase and refinance applications seeing significant increases [3][6] - Applications for home purchases were 20% higher than the same period last year, indicating a renewed interest in the housing market [5][6] - Refinancing applications also rose by 12% week-over-week, as homeowners sought to capitalize on lower rates [5][6] Group 3: Market Implications - The housing market appears to be recovering from a period of stagnation caused by high mortgage rates and elevated home prices [4] - The average loan size for refinances has increased, suggesting that borrowers with larger loans are particularly responsive to rate changes [6]

Core Insights - The interest rate on the most popular U.S. home loan has dropped significantly, with a 15 basis point decrease to 6.49%, the lowest since last October, driven by a weak employment report and expectations of a Federal Reserve rate cut [1][2] Group 1: Mortgage Rates and Applications - The 30-year fixed-rate mortgage rate has decreased by 60 basis points since mid-January, leading to increased application volumes for both home purchases and refinancing [2] - The Mortgage Bankers Association's weekly applications index rose by 9.2% to 297.7, the highest level in over three years, with refinancing applications increasing by 12.2% [3] - Refinancing applications accounted for nearly half of all applications last week, while the index for property purchase loans rose by 6.6%, reaching its highest in about two months [3] Group 2: Housing Market Conditions - The housing market has been experiencing a slump due to high borrowing costs, elevated property prices, and limited supply, but recent data indicates potential recovery [4] - The supply of existing homes for sale is gradually increasing, annual price increases are leveling off, and interest rates may ease further as the Federal Reserve appears ready to cut rates [4] Group 3: Economic Context - The Federal Reserve has maintained its benchmark rate at 4.25%-to-4.50% since last December, primarily due to concerns over inflation driven by tariffs [5] - Recent job reports have underperformed expectations, with significant downward revisions to prior job growth estimates, contributing to the decline in Treasury yields and subsequently mortgage rates [6] - President Trump has been advocating for rate cuts and has exerted pressure on the Federal Reserve, including attempts to influence its leadership [7]