After several years of volatility, the mortgage industry may be striking a steadier rhythm in 2025. Rates shifted, some inventory opened up, and AI-driven efficiencies created opportunities for smoother day-to-day operations.

But it wasn’t a full return to “normal.” Buyers also looked different, affordability remained tight, and new regulatory and tech developments required quick adjustment.

So, what exactly can we learn from this year? And what should mortgage professionals be ready for next? Let’s break down the key trends shaping 2025 and the outlook for 2026, so you can determine and successfully set all the right goals.

Which Macro Trends Defined the 2025 Mortgage Industry?

Easing Interest Rates

Interest rates were perhaps the biggest mortgage story of 2025. While they didn’t plummet to COVID-era numbers, interest rates did start to shift and possibly even stabilize.

Throughout 2025, mortgage rates hovered in a relatively stable mid-6% range with modest easing toward the end of the year, giving mortgage professionals more predictability than in prior cycles.

Still Tight — But Shifting — Inventory Rates

Of course, the inventory shortage wasn’t exactly solved this year. But there was some meaningful movement.

New-home supply rose to roughly 9.8 months (with a higher months’ supply figure generally indicating a slower market with more supply than demand), among the highest levels seen in recent years.

On a local level, key trends included:

• Sun Belt markets continued to lead the country in new construction, giving buyers in metros like Dallas–Fort Worth, Houston, Atlanta, and Tampa a larger share of new-construction options compared with recent years.
• Coastal metros remained tight, with higher home prices and slower new construction keeping inventory low in places like Los Angeles, Miami, Boston, and Seattle.
• Many Midwest and Mountain West markets saw (relatively) steadier conditions, with moderating price growth and movement toward more balanced supply.

Borrower Demographics Shifted

Despite interest rates easing and inventory ticking up, 2025 did not see a “typical” buyer landscape.

First-time buyers, for example, made up just 21% of all home purchases — the lowest share ever recorded. Their median age also climbed to 40, showcasing affordability concerns for younger households.

This year, repeat and move-up buyers dominated transactions. Many remained locked into ultra-low pandemic-era mortgage rates, but those who did move often brought more equity and more complex financial decisions into lenders’ pipelines.

How Did the Regulatory Landscape Shift in the 2025 Mortgage Industry?

The FHA Made Several Key Changes

The Federal Housing Administration (FHA) made a series of refinements to its documentation and appraisal rules. Early in the year, it rescinded multiple appraisal-related policies that had complicated property eligibility reviews and documentation requirements.

The FHA also issued updated guidance on borrower residency documentation, clarifying how lenders must verify and document a borrower’s citizenship or lawful permanent resident status.

The Federal Government Focused in on GSEs

Meanwhile, at the government-sponsored entity (GSE) level, federal oversight continued evolving. A 2025 Government Accountability Office report highlighted ongoing adjustments in the Federal Housing Finance Agency’s (FHFA) supervision practices, which signaled a continued focus on lender compliance and data accuracy across the system.

How Did Technology Advance in the 2025 Mortgage Industry?

AI Became More Practical and Commonplace

Artificial intelligence (AI) has been a hot topic for years now, including in the mortgage industry. But 2025 saw more discussion around key advancements in core systems and processes.

This includes:

• Smart document classification and data extraction: AI tools are increasingly able to automatically “read” pay stubs, bank statements, and tax forms, pulling critical borrower data faster.
• Accelerated document processing and workflow automation: With the help of AI, professionals can begin to reduce the manual burden of tasks like document verification. This can mean more efficient pipelines and fewer administrative bottlenecks across the loan lifecycle.
• Foundational AI infrastructure becoming a priority: In 2025, mortgage industry stakeholders began meaningfully investing in clean data architectures, data governance, and enterprise-grade AI systems to enable scalable, auditable automation over the coming years.

Essentially, 2025 was just the beginning. Next year, the mortgage industry will no doubt see continued interest and investment in AI.

How Did Borrowers’ Expectations Change in the 2025 Mortgage Industry?

Ease and Convenience Remained Top of Mind

On the whole, borrowers in 2025 expected a mortgage process that felt as intuitive and transparent as the other digital experiences they regularly rely on.

This included seeking out providers who offered:

• Self-serve borrower portals for uploading documents and checking loan progress.
• Real-time updates that give borrowers better visibility into milestones.
• Cleaner upfront documentation checklists to reduce confusion and delays.
• Consistent digital communication, including email, text, and portal messaging.

These expectations complement the industry’s increasing usage of AI and automation. And, when paired together, stronger digital workflows and clearer communication can help rebuild confidence among borrowers who have been waiting for that “right moment” to jump in.

Predictions for the 2026 Mortgage Industry: What Might Come Next?

Rates May Ease Slightly

Most forecasts suggest a gradual dip in mortgage rates in 2026, but not a sharp plunge. For example, Fannie Mae’s research projects the average 30-year fixed rate could fall to 5.9% by the end of 2026. Meanwhile, the National Association of REALTORS® anticipates rates around 6%, slightly below 2025’s average.

It’s important to note that even a modest rate drop could be meaningful in terms of mortgage activity:

• Refi interest could show signs of continued growth: With rates trending downward, borrowers who are locked in at higher rates may see refinancing as an opportunity to reduce their payments.
• Purchase demand could rise: Affordable rates improve monthly payment outlooks, possibly drawing new buyers back into the market.
• Move-up buyers might feel confident enough to list: For homeowners sitting on older, below-market mortgages, a small rate drop plus improving inventory could lead them toward listing.

Affordability Pressures Will Likely Continue to Shape Buyer Behavior

Even if rates do ease in 2026, affordability challenges will remain. According to the National Association of Home Builders, 57% of U.S. households cannot afford a $300,000 home under current wage-to-price conditions.

This means:

• First-time buyers may still struggle: High prices and down payment barriers could continue to curb entry-level demand.
• Demand may skew toward higher-income or equity-rich borrowers: These groups will likely remain best positioned to manage high monthly payments.
• Starter-home inventory will likely matter more than ever: If rates ease, markets with new-entry or lower-priced homes could see the strongest lift.

Essentially, even with rate relief, pricing will almost certainly continue to shape who buys and who doesn’t.

The Right Tech Stack Could Become Increasingly Critical

Technology, especially AI, is expected to play a much bigger role in 2026. MBA’s recent industry analysis notes that lenders are moving from AI “pilots” to deeper, workflow-level integration, particularly in areas like document review, income and asset analysis, and quality control.

This could lead to:

• Faster turn times: AI-driven document support and workflows could help reduce bottlenecks and backlogs.
• More transparent borrower communication: Digital updates and proactive messaging will become increasingly expected.
• A competitive edge for tech-forward mortgage professionals: Borrowers may value ease and clarity over rate alone.

Final Thoughts: 2025 Mortgage Industry Year in Review

Throughout 2025, mortgage professionals saw clearer rate patterns, modest but meaningful inventory improvements, and a wave of technology investments to help reduce friction across the loan lifecycle. At the same time, affordability constraints, shifting buyer profiles, and evolving oversight kept the landscape complex.

As we move into 2026, mortgage professionals who lean into strong borrower communication, smart technology adoption, and thoughtful workflow optimization may be best positioned to capture rising demand

Key Takeaways

• Rates have largely stabilized in 2025, giving mortgage professionals and borrowers more predictability than in recent years.
• Inventory improved modestly, with new-home supply making up a larger share of available listings even as many markets remained tight.
• First-time buyer participation fell to a record low, shifting most 2025 purchase activity to repeat and move-up buyers.
• Regulatory updates from FHA and evolving FHFA oversight influenced appraisal rules, residency documentation requirements, and compliance expectations.
• AI became more practical and integrated, helping automate document review, streamline workflows, and support cleaner, more efficient loan files.
• Borrowers expected clearer, faster, more digital experiences, driving increased reliance on portals, real-time updates, and transparent communication.

Looking ahead to 2026, gradual rate easing, persistent affordability challenges, and deeper AI adoption could shape how mortgage professionals compete, communicate, and serve borrowers.