The U.S. housing market is no longer waiting on the sidelines. After enduring over two years of historically high mortgage rates, the Federal Reserve began implementing rate cuts in fall 2025, with additional reductions forecast for early 2026. For lenders, this marks more than a turning point—it’s a call to action.
Whether you’re targeting first-time buyers, tracking refinance-ready loans, or watching affordability trends, today’s environment demands rapid, strategic adjustments.
Rate cuts are fueling renewed demand
Mortgage rates, which hovered around 7% for much of the past year, have begun to ease. Even a modest drop has the potential to unlock substantial borrower interest—particularly among the 4.4 million U.S. mortgages now “ripe” for refinance.
Expect a spike in both rate-and-term refinances and cash-out activity, as homeowners look to lower payments or access equity. Lenders must scale up quickly, especially around digital capacity, prescreen targeting, and streamlined closings.
Affordability is still a roadblock—Especially for younger renters
Despite improving borrowing conditions, affordability remains a systemic challenge. The national rent-to-income (RTI) ratio stands at 46.8%, up 7.7% since early 2023. In high-cost states like California and Massachusetts, it exceeds 56%.
Experian data reveals that 62% of renters fall into the low-to-moderate income category, spending over half their income on rent. Over 50% now fall into Near Prime or Subprime credit tiers, making alternative credit data—like rental payment history—vital for inclusive underwriting.
Refinance isn’t the only opportunity—Target first-time buyers strategically
Gen Z is now the largest segment of the rental population, and many are financially strained yet aspirational. A major opportunity exists in helping these renters transition to homeownership using expanded credit models and customized offerings.
With Federal Housing Finance Agency (FHFA)-approved models like VantageScore 4.0 and FICO 10T on the horizon, lenders should explore how newer scoring frameworks and rent payment reporting can increase access to mortgage credit.
Region-specific strategies are more important than ever
From Miami to Minneapolis, market conditions vary drastically. Some metros, like Kansas City (+16.7%) and Louisville (+14.2%), are experiencing double-digit rent growth, while cities like Atlanta and Jacksonville are seeing declines.
Lenders must tailor outreach based on local affordability trends, migration patterns, and housing supply constraints. Dynamic analytics tools—like Experian’s Ascend or Mortgage Insights Dashboard—can guide regional strategy at scale.
The supply side may not keep pace
Even with rate cuts stimulating demand, housing supply could remain a bottleneck. Multifamily completions are outpacing starts 1.5 to 1, and single-family construction, though recovering, remains cautious.
In markets with tight supply, reduced borrowing costs may drive up prices faster than inventory can absorb, exacerbating affordability for first-time buyers.
What lenders should prioritize now
• Build Refinance Infrastructure: Prepare for increased volume with instant income verification tools like Experian Verify to streamline processes.
• Target First-Time Buyers: Use rental history, cashflow scores, and rent-to-income metrics to assess nontraditional credit applicants fairly.
• Get Granular with Geography: Align product offerings with local affordability, vacancy rates, and rent growth.
• Leverage Self-Service Prescreen Tools: Act on opportunities quickly using Experian’s agile targeting platforms.
• Model with New Credit Scores: Take advantage of the Experian Score Choice Bundle to test VantageScore 4.0 and FICO 2 side by side.
Final Thought: The market is not rebounding—It is realigning
The current housing shift is not a return to old norms—it’s the start of a redefined landscape. Lenders who act decisively, invest in technology, and prioritize inclusivity will lead the next chapter in mortgage growth.
Experian is here to support you—with data, insights, and tools designed for this very moment.