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The economy is finally catching up on data and reporting disruptions due to the shutdown. After the latest Federal Reserve 25 basis points rate cut, the Fed appears divided over the frequency and amount of future rate cuts. Consumer prices are expected to remain elevated even as the pace of price hikes levels off.
Home buying and building is expected to increase in 2026 in response to recent mortgage rates drop. However, home listings are still low relative to buyer demand. The real estate market is not uniform, some markets remain hot while others have cooled or have even experienced home price declines. Affordability remains a challenge to many potential buyers as real estate taxes and homeowner’s insurance continue to increase making home buying out of reach for many potential buyers, particularly, first time home buyers.
MCT’s Base Mortgage Rate declined from 6.26% to 6.23% at the end of November, representing a three (3) basis points decline since October 31, 2025. The Mortgage Bankers Association and Fannie Mae continue to project that rates will remain in the range of 6.00% - 6.50% for the remainder of 2025 despite the Federal Reserve’s recent 25 basis point cut.
MSR fair values have remained robust and show very little disruption from current mortgage and float income rate volatility. Demand for MSR, particularly by the aggregators, has remained strong throughout 2025.
New Production Value Trends:
Refinancing activities cooled off during the month of November. Most of the recent refinancing activity occurred within the 2021-2023 loan vintages as borrowers tap into their growing home equity. Home equity levels have reached record levels since the pandemic; however, some states have shown recent declines in home equity levels by about 1-2% below their prior year marks.
MCT’s data and analytics revealed a slowdown in prepayment speeds during November over October marks due to mortgage rates leveling off and borrowers’ caution over global economic uncertainties and in addition to job market volatility.
Current servicing released premiums (SRP) remain relatively strong as major aggregators continue to offer record SRP prices, including FHA production. We anticipate those levels to remain elevated for the remainder of 2025 and January 2026.
The current average SRP levels remain at about 15-25 basis points higher than the average fair value. We continue to advocate for caution when capitalizing new MSR production at moderate price levels as current SRP levels reflect the aggregator’s economies of scale rather than actual fair value.
Bulk MSR Market
Many MSR buyers have remained bullish about the strength of the MSR market and their appetite to purchase more MSRs in the near future. However, large MSR holders may opt to offload some of their MSR holding during Q1, 2026 to cash in on some of the strong MSR values. MSRs continue to offer attractive yields and income for servicers, especially when loan originations volume remains low.
Bulk MSR portfolios continue to trade at servicing fees multiples between 5.25X and 5.75X. Government MSRs with no delinquencies and with interest rates below 5.00% continue to trade at 4.00X or higher. Newer conventional loan vintages from 2024 and 2025 are trading at about 4.50X multiples of servicing fees.
Non-QM and Second Mortgages Trends
Non-QM production during 2025 averaged about $50 billion per quarter and is expected to remain robust in 2026. Total available home equity currently stands at above $18 trillion which is very similar to the overall level in consumer debt. This combination offers borrowers with financial and economic flexibility, including debt consolidation alternatives.
The tightening of the spread in interest rates between Non-QM and Agency products continues to fuel demand for such mortgage products and offers more liquidity for such products. The current interest rate spread between agency mortgage loans and Non-QM mortgage loans is ranging between 35 and 60 basis points.
Non-QM prepayment speeds have slowed down since October while delinquency levels continue to rise steadily. In some states, the delinquency rates have reached levels that could have implications for some MSR holders.
HELOCs and closed-end second mortgage production have leveled off since October but remain a great option for many potential borrowers that have high home equity levels.
The bulk MSR market for these two segments remains virtually nonexistent. Underlying fair values for non-QM MSR products remain between 3.65 – 4.40 multiple of servicing fees while Second Mortgages and HELOC MSR products fair values are between 2.30x and 3.25x multiples of servicing fees.
Mortgage Rates
As of November 31, 2025, the current fixed 30 Year mortgage rate is 6.230%, which represents about three (3) basis points decline from October 31, 2025, mark.
Escrows and Float Income
Mortgage escrow values have declined from their October 31, 2025, marks due to the eight (8) basis points decline in float income rates. Escrow float income value is the second largest contributor to the overall MSR value.
Rates Indices
The recent Federal Reserve’s rate drop had no impact on mortgage rates. In fact, the market had experienced some reversal from recent mortgage rates declines.
The current Treasury Yield Curve continues to reflect some economic distress and future economic uncertainties.
The yield on the benchmark 10-year Treasury is at 4.02%, six (6) basis points lower than the prior month. The current yield curve is slightly flatter than the prior month, however, the Treasury curve remains steeper as the lower end of the curve dropped while the long end of the curve remained high, reflecting investor’s continued demand for higher yields due to the current economic uncertainty.
The current spread between the 2 Yr Treasury rate and the 10 Yr Treasury rate is on a trajectory signals the potential for more economic challenges ahead.
Fair Value Guidance
Our November 30, 2025, fair values guidance for existing portfolios should slightly decrease from their October 31, 2025, marks. Mortgage rates have retreated by an average of about four (4) basis points, and the float income rate has declined by about eight (8) basis points since October 31, 2025; Therefore, we anticipate that most of the decline in the value should stem from the float income rate.
MSR holders should expect a decrease in fair values by less than two basis points, primarily because of the decrease in float income rates.
For portfolios that have a mix of Conventional and Government loans, we anticipate Fair Value changes as follows:
- Conventional loans between -1 to -2 bps change from October 31, 2025, marks.
- Government loans between -1 to -2 bps change from October 31, 2025, marks.
If you have any questions or would like to schedule a call with our MSR team, please contact us today.
About MCT:
For over two decades, MCT has been a leading source of innovation for the mortgage secondary market. Melding deep subject matter expertise with a passion for emerging technologies and clients, MCT is the de facto leader in innovative mortgage capital markets technology. From architecting modern best execution loan sales to launching the most successful and advanced marketplace for mortgage-related assets, lenders, investors, and network partners all benefit from MCT’s stewardship. MCT’s technology and know-how continues to revolutionize how mortgage assets are priced, locked, protected, valued, and exchanged – offering clients the tools to thrive under any market condition.
For more information, visit https://mct-trading.com/ or call (619) 543-5111.
Media Contact:
Ian Miller
Chief Marketing Officer
Mortgage Capital Trading
619-618-7855
pr@mctrade.net
