What Lenders Need to Know About the Housing Market Shift in Late 2025

by Ivan Ahmed 3 min read January 15, 2026

A Realignment is underway 

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. 

 

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Cash Flow Insights: Powering the Next Evolution in Lending

For decades, credit data has given lenders a trusted foundation for assessing risk. Now, consumer-permissioned cash flow data is adding another layer of insight into consumers’ financial lives, including income, spending, liquidity and changing financial obligations. The opportunity is significant. Nearly one in five consumers lacks access to or has damaged credit. New Experian research also shows that 60% of consumers who have previously been denied credit or received less favorable terms than expected believe the outcome would have been different if lenders had considered their recent income and banking activity alongside their credit history. 1,2 For lenders, cash flow insights can provide additional context about a consumer’s financial capacity and support more informed underwriting decisions. The next challenge is making those insights easier to use consistently and responsibly at scale. What are cash flow insights? Cash flow insights are derived from consumer-permissioned banking data and provide visibility into how money moves into and out of a consumer’s accounts. Depending on the information available, cash flow data can provide insight into financial behaviors such as: Income and income stability: Regular and irregular income streams and changes over time Spending and recurring expenses: Everyday spending patterns and ongoing financial obligations Account balances and liquidity: Available funds and changes in account balances Debt obligations: Loan payments and other recurring debt commitments Cash flow patterns: How money moves into and out of accounts over time Traditional credit information provides a rich history of how consumers have managed credit. Cash flow insights add context about their current financial activity and capacity, providing lenders with a more complete view of financial health. Cash flow insights can also add predictive value to risk assessment. Experian analysis shows Cashflow Score can deliver up to a 25% lift in predictive performance over conventional credit scores when tailored to targeted risk tiers.3 How lenders can put cash flow insights to work at scale As interest in cash flow insights grows, the conversation is moving beyond what the data can reveal to how financial institutions can use it consistently and responsibly. That requires standardized consumer reporting, clear governance and decision-ready insights that can work within established lending processes. The launch of Experian Cashflow Data Bureau at Vision 2026 reflects this shift from access to adoption. The new consumer reporting agency operates under the Fair Credit Reporting Act (FCRA) and is designed to help financial institutions adopt consumer-permissioned cash flow insights at scale. A key part of that foundation is the cash flow consumer report, which organizes consumer-permissioned banking information into a standardized consumer report regulated under the FCRA. This gives lenders a consistent foundation for incorporating cash flow information into lending decisions while providing consumers with access to the information in their report. Turning greater visibility into better decisions The next evolution in credit isn’t about choosing between traditional credit and cash flow data. Each provides a different perspective. Traditional credit information offers deep insight into how consumers have managed credit over time. Cash flow insights can add context about financial activity and capacity. Bringing those perspectives together can give lenders greater visibility into consumers’ financial health and help them better distinguish between risk and resilience, support more informed decisions and identify opportunities to responsibly expand access to credit. As cash flow adoption continues to grow, its value will come from how effectively it complements the information lenders already use. The opportunity isn't simply to see more data. It's to turn that additional visibility into smarter, more informed decisions. Explore how Experian Cashflow Data Bureau is helping financial institutions put consumer-permissioned cash flow insights into practice at scale. Learn more [1] Federal Reserve Bank of New York, The Market for Credit Building: Demand, Product Characteristics and Consumer Uses, 2026. [2] Experian commissioned Atomik Research to conduct an online survey of 2,000 U.S. adults age 18+. Fieldwork took place July 16–21, 2026. Margin of error: +/- 2.2 percentage points at a 95% confidence level. [3] Based on Experian analysis when Cashflow Score is compared with conventional credit scores, tailored to targeted risk tiers. Predictability based on KS.

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