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The mortgage market remained characterized by elevated interest rates, persistent inflation concerns, and heightened geopolitical uncertainty. Mortgage rates moved higher, firmly in the 6.375% - 6.75% range as bond markets repriced expectations for Federal Reserve easing. This is contrary to expectations earlier in the year that mortgage rates would gradually decline toward the 5% range. Current strong labor markets data, persistent inflation, and renewed energy price pressure pushed Treasury yields and mortgage rates higher. Consequently, the Interest rate outlook points to elevated levels through Q3, 2026.
Although the U.S. economy remained surprisingly resilient. The labor markets continued to perform well with steady job creation. Consumer spending remained healthy despite higher borrowing costs. Several economists and market participants concur that there is a possibility that the Federal Reserve could hold rates at the current level through all of 2026, with some even suggesting that there could be rate hikes if inflation accelerates further.
The housing market showed modest improvement despite elevated mortgage rates. Existing home sales increased 3.2% in May to an annualized pace of 4.17 units, which represents the strongest pace since December 2025. Housing inventory improved to approximately 1.55 million units but remained below pre-pandemic levels. The average home price rose to a record $429,300, though home price appreciation has slowed significantly. Affordability remained the primary constraint on sales activity.
As of May 15, the average 30 Year primary fixed mortgage rate increased by six basis points from April 30, 2026, and was lower than the prior month by about 10 basis points. This trended volatility is a significant sign that reflects inflation persistence, geopolitical instability, and rising Treasury yields. Many economists and lenders, including Fannie Mae, have revised their rate forecasts higher for the remainder of 2026.
MCT’s Base Mortgage Rate increased from 6.34% to 6.45% at the end of May, representing 11 basis points increase since April 30, 2026.
MSR fair values remained stable during May with a slight increase from April marks. MCT expects MSR values to increase by less than five (5) basis points from their April mark. However, MSR values could remain somewhat volatile in the short term due to geopolitical and economic uncertainties.
New Production and Value Trends:
Mortgage refinance activity remains subdued and highly sensitive to mortgage rate changes. Cash-out refinances and home equity loans remained the primary drivers of refinance activity. Overall refinance activity remained materially below historical averages despite improving year-over-year comparisons against weak 2025 volumes.
Current servicing released premiums (SRP) remain strong as major aggregators continue to offer record SRP prices, including FHA production. We anticipate those levels to remain elevated during Q3, 2026.
The current average SRP levels have increased by another 1-2 basis points from April, and MSR fair value levels have improved during May leading to a slight tightening of the spread between fair value and SRP. The current spread between fair value and SRP is about 13-19 basis points. 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
Bulk MSR trade activities remained healthy as more MSR buyers pursue limited MSR supply. MCT anticipates sustained bulk MSR activities as MSR owners take advantage from the elevated mortgage rates and MSR buyers continue their aggressive pricing levels while loan origination levels remain low.
MSR investors remain bullish about the strength of the MSR market and intend to acquire more MSRs as they become available. The MSR market continues to experience some consolidation, which is likely to increase during the remainder of 2026 as the mortgage lending market navigates economic and global uncertainties that could have an impact on the economy. 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 5.00X and 5.50X. Government MSRs with no delinquencies and with interest rates below 5.00% continue to trade at around 4.00X. Newer conventional loan vintages from 2024 and 2025 are trading between 4.00X and 4.50X multiples of servicing fees.
Non-QM and Second Mortgages Trends
Non-QM and home equity markets remained relatively resilient. Demand from self-employed borrowers and real estate investors remained steady. DSCR (Debt Service Coverage Ratio) lending continued to outperform other non-QM segments. Credit standards remained disciplined, particularly for higher combined loan-to-value (CLTV) transactions.
HELOC and second-lien production remained supported by homeowners seeking liquidity while preserving their low-rate first mortgages.
Performance remained generally stable. DSCR and investor loans continued to outperform consumer Non-QM products while bank-statement and higher DTI loans showed modest softening but remained well below historical highs. Strong borrower equity continues to mitigate loss severity across all loans.
Prepayment speeds remained primarily home transaction-driven rather than refinance driven. Investor sales and property turnover in May generated the vast majority of the prepayment activity.
MCT anticipates that Non-QM loan values will remain steady and potentially rise over the course of the year. The bulk MSR market for these two segments remains virtually nonexistent. Underlying fair values for Non-QM MSR products remain between 3.50 – 4.25 multiples of servicing fees while second mortgages and HELOC MSR products fair values are between 2.25x and 3.25x multiples of servicing fees.
Did you know MCT offers non-qm portfolio valuations? Contact the MSR team today to learn more or schedule a consultation.
Mortgage Rates
As of May 29, 2026, the current fixed 30 Year mortgage rate is 6.4485%, which represents an 11.3 basis points increase from their April 30, 2026, mark.
Escrows and Float Income
Mortgage escrow values continue to rise from the April 30, 2026, mark due to a 13 basis points increase in the float income rate. The Escrow float income value is the second largest contributor to the overall MSR value.
Rates Indices
Mortgage rates have increased from their April 30, 2026, marks. MCT’s Primary 30 Year mortgage rate increased by 11.3 basis points to 6.4485%.
The current Treasury Yield Curve continues to reflect economic distress and future economic and geopolitical uncertainties.
As of May 29, 2026, the yield on the benchmark 10 Yr Treasury is at 4.439%, representing a seven (7) basis points increase from the prior month. The current yield curve remains steep, due to inflation and economic concerns, plus the geopolitical risks.
The current spread between the 2 Yr Treasury rate and the 10 Yr Treasury rate is on a trajectory that signals the potential for more economic challenges ahead. The current spread has tightened by six (6) basis points since April 30, 2026.
Fair Value Guidance
Our May 29, 2026, “fair value” guidance for existing portfolios should experience a slight increase in value from their April 30, 2026, marks due to improved mortgage rates and float income rates. We anticipate that portfolios with an average interest rate above 6.0% will experience a higher increase in values ranging between 1-3 basis points while portfolios with an average interest rate below 6.0% will experience a narrower decrease in values between 1-2 basis points.
MSR holders should expect a maximum change in values ranging between +1 and +3 basis points.
For portfolios that have a mix of Conventional and Government loans, we anticipate Fair Value changes as follows:
- Conventional loans between +1 to +3 bps change from April 30, 2026,
- Government loans between +1 to +4 bps change from April 30, 2026,
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
