Trading levels in the bond market directly impact the rates that mortgage lenders can offer. This is why rates moved so much lower after last week’s news regarding planned purchases of $200bln in mortgage backed bonds.  But bonds aren’t the only input for rates, and those other inputs can make for days like today where bonds are noticeably better while mortgage rates refuse to follow. Those other inputs aren’t as easy to observe and quantify as the objective trading levels in the bond market, but in the current case, we can assume that at least some of the explanation has to do with mortgage lenders quickly becoming too busy to handle more volume. “Busy” isn’t necessarily the right word, but in this case, it’s a catch-all term for the side effects of rapidly originating a much higher volume of new loans. One aspect has to do with the flow of funding. Lenders don’t have unlimited cash to accept new lock commitments.  As they approach those limits, they will raise rates (or not lower them as much as their peers) to deter new business. A slightly more esoteric aspect has to do with deterring borrowers who recently acquired new mortgages from refinancing. Early payoffs (which mostly occur via refinancing when rates unexpectedly fall) cost lenders money because, on average, lenders pay more than the principal amount to originate a loan.  They then rely on earning interest to offset that expense. An early payoff means they won’t be able to collect that interest. As such, they have an incentive to avoid setting rates at low enough levels to entice recently minted mortgages from refi’ing. 

In our world, no one expects lender and/or vendor mergers and acquisitions to diminish in 2026, and in today’s Mortgage Matters at 2PM ET, presented by Lenders One, Garth Graham, Senior Partner at STRATMOR Group, will break down key M&A trends, recap the pivotal developments of 2025, and share insights on what lenders can expect in 2026. (Garth leads the firm’s M&A practice and advises many of the industry’s top independent and bank-owned mortgage lenders.) We’ve all seen the M&A that is going on in banks. Cashless banks? People get confused and society is going to the dogs when it’s full of caffeine-free coffee, gluten-free bread, and alcohol-free beer. (Today’s podcast can be found here and this week’s are sponsored by Figure. Take advantage of Figure’s technology and products like its fixed HELOC, DSCR loan, piggyback loan, and direct debt paydown, helping you serve more of your existing network and expand into new markets. Hear an interview with Key Mortgage Services’ Jen Poniatowski on how lenders should adjust borrower expectations in a falling rate environment, buyer leverage is shifting as inventory rises, and economic uncertainty is shaping first-time buyer confidence and product choice.) Products, Services, and Software for Brokers and Lenders It’s 2026, and AI is expected to undergo rapid evolution this year. That’s why lenders should gear up for the new year with tools that will evolve too. Floify’s Dynamic AI brings next-generation intelligence directly into your POS, functioning as a skilled digital assistant that manages document recognition, data cleanup, extraction, and automatic verification. Borrowers upload a document once (such as a paystub or W-2) and see verified data flow through their application without repeated steps or frustrating password resets, resulting in a smoother path to pre-approval. Lenders get cleaner files, fewer abandoned applications, and lower processing costs. And because Dynamic AI is embedded inside Floify’s platform, you gain all the benefits of advanced AI without adding new systems or rebuilding workflows. Yes, AI will move fast during 2026, but with Dynamic AI you’ll be ready to keep pace. Experience tomorrow’s workflow: request a future-ready demo.

As we reported last week, the announcement that Fannie and Freddie would buy $200bln in mortgage-backed securities led to a precipitous drop in rates last week. For most of Friday, the top tier 30yr fixed rate was at 5.99% for the average lender according to MND’s daily mortgage rate index–the lowest in roughly 3 years.  And that single day of ridiculously low rates was enough to visibly juice application activity. The Mortgage Bankers Association (MBA) reported a 28.5% jump in applications for the week ending January 9th. One small caveat: the prior week’s data included an adjustment for the New Year’s Day holiday, exaggerating the contrast, but the underlying rebound was nonetheless substantial. The Refinance Index surged 40% from the previous week and was 128% higher than the same week one year ago, marking the strongest weekly pace since October.  Purchase activity also strengthened meaningfully. The seasonally adjusted Purchase Index rose 16% week-over-week, while unadjusted purchase applications jumped 51% and remained 13% above last year’s level, signaling continued buyer engagement as rates moved lower. “Mortgage rates dropped lower last week following the announcement of increased MBS purchases by the GSEs. Lower rates, including the 30-year fixed rate declining to 6.18 percent, sparked an increase in refinance applications,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Compared to a holiday-adjusted week, refinance applications surged 40 percent to the strongest weekly pace since October 2025. The average loan size for refinance applications was also higher, as borrowers with larger loan sizes are typically more sensitive to changes in rates.”

Kelman chose to step down from the company, which he had spent 20 years running, a week before its second phase of integration with Rocket.

Total lock volume increased 2% from November and finished 30% higher than last December, according to Optimal Blue’s latest Market Advantage report.

“These changes reflect adjustments we’re making to ensure our staffing levels, locations and expertise align with current business needs; efficiencies we have gained through technology; and progress against our transformation work,” the company said in a statement.

The bank did $16 billion of originations during the final three months of 2025, with the quarter-to-quarter increase beating industry-wide growth forecasts.

President Trump Tuesday told reporters he would not delay announcing his pick to fill a new vacancy on the Federal Reserve Board despite threats from Republican Senators to block any Fed nomination until a recently-disclosed Justice Department investigation into Fed Chair Jerome Powell is resolved.

According to our chart of MND’s mortgage rate index, 30yr fixed rates bottomed at 6.01% yesterday, but that’s because the chart logs the day’s latest entry.  On Friday, until late in the day, the chart showed a rate of 5.99%. It was only after several lenders raised rates in the afternoon that the index moved up to 6.06%. Today’s rates ended up just a hair higher than that at 6.07%. Most of the underlying market weakness that accounts for today’s jump occurred yesterday afternoon. Lenders who raised rates yesterday afternoon offered roughly comparable rates this morning.  Things might have ended up worse today had it not been for a reasonably well-received CPI report (Consumer Price Index). This important data showed inflation remaining in check in December, with the most closely-watched metrics coming in just below the median forecast.  Lower inflation is good for rates, all else equal, but inflation isn’t falling fast enough to have a big impact in the short term. In today’s case, it did more to help the bond market avoid losing ground than it did to spark a new rally. [thirtyyearmortgagerates]

CPI Helped Bonds Avoid Losing Ground

Bonds began the day in slightly weaker territory and managed to flip into slightly stronger territory after the CPI data. Core monthly CPI printed at 0.2, but was rounded down from 0.24. In other words, it wasn’t as big of a beat as the “0.2 vs 0.3” result suggested. The notion of inflation being “lower but still elevated” contributed to the tepid response. As for MBS, they were in positive territory all day even though charts made them look weaker due to monthly settlement.  Wednesday morning brings November’s retail sales data and Producer Price Index (PPI). Neither are as heavy hitting as CPI, but they could move the needle of they fall far from forecast. 

Econ Data / Events

m/m CORE CPI (Dec)

0.2% vs 0.3% f’cast, — prev

m/m Headline CPI (Dec)

0.3% vs 0.3% f’cast, — prev

y/y CORE CPI (Dec)

2.6% vs 2.7% f’cast, 2.6% prev

y/y Headline CPI (Dec)

2.7% vs 2.7% f’cast, 2.7% prev

Market Movement Recap

08:32 AM Stronger after CPI data. MBS up just over a quarter point and 10yr down 1.6bps at 4.16

10:50 AM Choppy after initial rally but still slightly stronger.  MBS up 5 ticks (.16) and 10yr down half a bp at 4.173

01:15 PM 30yr auction 4.825 vs 4.833 f’cast. Bid to cover 2.42 vs 2.38 avg.  No major reaction.  10yr down 1.1bps at 4.167 and MBS off weakest levels, up 5 ticks (.16) on the day.

04:37 PM 10yr yields down 0.3bps at 4.175 and MBS up 5 ticks (.16).