2026 Outlook: Rates, Jobs, and Industry Trends to Watch | Dec. 22, 2025

Here’s what you need to know this week.

This Week’s Key Signals

Spreads Tighten

The OBMMI closed at 6.17%, with the 10‑year Treasury around 4.17%, leaving about a 200 bps spread between them – one of the tightest levels we’ve seen in years.

“The spread is exactly 2%… that’s about as small as it’s been in the past four or five years.”  –  Jim Glennon

Better pricing conditions are slowly forming underneath the market, even if headline mortgage rates aren’t falling dramatically.

Labor Market Is Cooling, Not Collapsing

After months of delays, the unemployment report finally arrived – and aligned with what many lenders already felt: the job market seems to be losing a little steam.

• Unemployment ticked up to 4.5%

• Hiring remains slow across most industries

• Healthcare continues to carry the load

“We’re now at 4.5%, entering the zone the Fed watches closely.”  –  Alex Hebner

The team says businesses are being cautious. It doesn’t seem like a jobs crisis, but it’s definitely not a hiring boom either.

Inflation Came In Soft… But the Details Matter

CPI landed at 2.7%, but a big chunk of the reading – rent and owners’ equivalent rent – was seemingly copied from September due to BLS staffing constraints.

Alex notes the inflation number looked friendlier than expected, but the market doesn’t seem to be buying it. Long‑term rates likely did not move because investors see the data as “noisy.”

2026 Outlook: What Should Be on Your Radar

The Optimal Insights team laid out a roadmap of what’s likely to shape the mortgage and housing markets next year.

Rates May Come Down – But Not Dramatically

With Fed turnover coming in early 2026 and softer employment data, the team expects multiple rate cuts next year. But they note mortgage rates may not drop as dramatically as borrowers hope.

“Projections for mortgage rates are still between 5.9 and 6.2 – even with cuts.”  –  Jim Glennon

Why:

• The long end of the curve remains stubborn

• Investors prefer equities over bonds

• Demand for capital is still high across tech, manufacturing, and defense sectors

This can keep upward pressure on long‑term yields.

Debt Supply & Capex May Shape the Bond Market

Companies and governments are borrowing heavily to fund AI, reshoring efforts, and infrastructure. That competition for capital keeps yields firm.

“It’s a limited number of dollars chasing yield.”  –  Alex Hebner

The team’s insights: More competition for investor dollars → higher yields → higher mortgage rates than the Fed alone might suggest.

Housing Could See More Movement

The team expects parts of the housing market to “thaw” as:

• Prices soften modestly in select MSAs

• More homeowners consider moving despite higher rates

• HELOC and renovation activity increases

“If your house isn’t appreciating and you can’t afford to upgrade, you might "upgrade in place" with a HELOC.”  –  James Cahill

Be ready for more equity‑based products and a purchase market with more local variation.

Policy & GSE Watch

Potential headlines in 2026:

• GSE privatization discussions

• Possible shifts in bank capital requirements

• Ongoing affordability initiatives from FHFA

• Credit score model changes bubbling back up

The team notes these won’t all be market‑moving, but they may shape lender strategy and borrower access.

Actionable Advice for Mortgage Professionals

Here’s where lenders and advisors should focus as we move into 2026:

• Prioritize Recapture: Millions of borrowers still have mortgage rates above 6%. They may remain your fastest path to early‑2026 volume.

• Lean Into HELOCs and Renovation Loans: With many borrowers staying put, the team expects more equity extraction and home‑improvement financing.

• Plan for a Steeper Curve: Even with cuts, long‑term rates may stay sticky. Build scenarios and price locks accordingly.

• Watch Local Market Trends: Some MSAs may see modest price normalization and increased activity – don’t treat the whole country the same.

• Tighten Ops and Cycle Time: A flat-to-slightly-lower rate environment favors lenders who execute cleanly and communicate clearly.

2026 won’t be a dramatic reset – but it may offer more opportunities than 2025. The team expects a year shaped by moderate easing, more housing activity, and a growing need for borrower education and product flexibility.

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The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Optimal Blue, LLC.