Capital Markets Recap – October 23, 2026

The mortgage industry is confronting a fundamental affordability problem: housing costs remain stubbornly high just as consumers, lenders, and builders are losing momentum. President Trump’s executive order seeks to address part of that problem by directing federal agencies to develop measures that could reduce mortgage insurance expenses, refinancing costs, and rates on certain USDA and VA loans, while encouraging more affordable manufactured housing. The order establishes a direction, not immediate savings. FHFA, Fannie Mae, Freddie Mac, and other agencies must still determine how the initiatives will work, who qualifies, and when they take effect. NAMB President Michael Farrell’s advice is therefore especially relevant: mortgage professionals should wait for official guidance before changing their business practices. The real test will be whether implementation produces meaningful, accessible savings for borrowers without compromising consumer protections or competition.

Mortgage applications are falling, pending sales are weakening, and housing starts have declined as elevated interest rates, high home prices, and limited inventory squeeze both buyers and builders. Purchase applications recently fell 18 percent year-over-year, while refinancing applications plunged 59 percent. Builders are cutting prices, offering rate buydowns, and constructing smaller homes, but these adjustments cannot fully compensate for the cost of financing and construction. Household financial stress is also mounting, with cited Federal Reserve data showing that one in five Americans fell behind on a loan or mortgage payment in 2025. It’s a self-reinforcing cycle: expensive financing suppresses demand, limited supply sustains housing costs, and fewer transactions weaken the incentives to build. Executive action may ease selected expenses, but restoring affordability will require broader improvements in financing conditions, housing supply, and household purchasing power.

Treasury and mortgage-backed securities prices can rise alongside equities or move in the opposite direction, depending on inflation, investor sentiment, and demand for safe-haven assets. Recent bond rallies driven by technology-stock weakness and geopolitical concerns have been followed by renewed selling as Treasury issuance and tensions involving Iran unsettled investors. The enormous financing requirements of the federal government and AI infrastructure add another layer of uncertainty: a slowdown in AI investment could ease borrowing pressures, but a broader market correction could also weaken economic growth. Expectations for Federal Reserve policy remain fluid, with inflation and wage pressures potentially keeping rates higher for longer. Lower mortgage rates require more than a Fed rate cut or a temporary Treasury rally. Inflation expectations, long-term borrowing costs, mortgage-backed securities spreads, and investor demand all influence the rates borrowers actually receive. Volatility creates opportunities, but it also makes confident predictions hazardous.

It would behoove you to distinguish between potential relief and measurable recovery. The executive order could lower costs for eligible borrowers, but Agency implementation will determine its reach, timing, and effectiveness. Insurers appear likely to face a manageable direct impact, while lenders and brokers must continue navigating weak demand, financially strained households, and unpredictable funding markets. The coming months will hinge on Agency guidance, inflation data, Federal Reserve decisions, Treasury supply, and whether housing demand stabilizes. Ultimately, the strongest mortgage businesses will be those that remain operationally disciplined, communicate carefully with borrowers, and prepare for multiple rate scenarios rather than betting on one forecast. While policy can open the door to lower costs, only effective execution and healthier market fundamentals can turn that into a sustainable housing recovery.