Market Update and Current Interest Rates (02/2026)

February 19, 2026

Market Update

Stocks are lower this morning, while Mortgage Bonds are roughly unchanged to start the day.

The minutes from the January 28 Fed meeting showed a clear split among members:

Some members believe the Fed Funds Rate is already in “neutral” territory and support pausing.
The Doves (including Christopher Waller and Stephen Miran) feel policy remains meaningfully restrictive and that the labor market is weak.
The Hawks believe the labor market is stabilizing and want language added that rate hikes remain on the table if inflation does not fall.

The labor market data has been soft. The most recent jobs data from the Bureau of Labor Statistics suggests 2025 growth was weaker than previously reported, and revisions could come in lower.

On inflation, several Fed members noted that inflation should continue moderating as:

Tariff impacts fade
Housing disinflation continues
Productivity improves
Deregulation eases pricing pressures

It’s important to remember these minutes are three weeks old and predate the latest CPI reading, which showed 2.5% year-over-year Core inflation. There is also a leadership transition coming. Kevin Warsh is expected to take over as Fed Chair in mid-May. While considered more hawkish by some, we believe he understands that policy is currently restrictive, inflation is trending down, and labor is soft. Our base case: several rate cuts later this year.

Pending Home Sales – Weather Impact

January Pending Home Sales (signed contracts on existing homes) came in weaker than expected, down 0.8% month-over-month versus the 2% gain forecast.

Weather played a big role:

Northeast: -6%
South: -5%
Midwest: +5%
West: +4%

A rebound is expected, especially in the Northeast once weather normalizes. Lawrence Yun, Chief Economist at the National Association of Realtors, made an important point: With mortgage rates near 6%, there are an estimated 5.5 million additional households that could qualify to buy compared to last year. If just 10% of them enter the market, that’s roughly 550,000 new buyers. If that demand materializes, it could put upward pressure on home prices — especially since builders have pulled back and can’t quickly ramp supply.

Bottom line: There is opportunity in housing right now. Demand is building beneath the surface.

Rent Data – Inflation Tailwind

Cotality’s Single-Family Rent Index showed:

New rents down 0.7% in December
Up only 1.2% year-over-year
Multifamily rents are down year-over-year

Continued rent disinflation should help overall inflation moderate further this year — supportive for lower rates.

Jobless Claims – Soft Labor Continues

Initial Claims fell 23,000 to 206,000 (holiday distortions likely).
Continuing Claims rose to 1.87 million.

In December 2025, 7.1% of home sales fell out of contract, unchanged from a year earlier, according to Realtor.com. At the same time, existing-home sales dropped 8.4% in January, marking the slowest pace in more than two years.

Here are the top 5 metros with the highest cancellation rates:

1. Atlanta, GA: 10.3%

2. Las Vegas, NV: 10.1%

3. San Antonio, TX: 9.6%

4. Riverside, CA: 9.3%

5. Phoenix, AZ: 9.2%

This comes as sales of existing homes nosedived 8.4% in January—the slowest sales pace in more than two years, even as mortgage rates touched a three-year low of 6.09%.

Mortgage rates drop to one-month Low, refinance applications surge

Mortgage rates fell to their lowest level in a month last week, driving a 7% jump in refinance applications while purchase demand declined, according to the Mortgage Bankers Association.

Key numbers:

· Average 30-year fixed rate dropped to 6.17% from 6.21%

· Refinance applications up 7% for the week, 132% higher than a year ago

· Purchase applications down 3% for the week, only 8% higher year-over-year

· Total mortgage demand rose 2.8%

Why rates fell: Treasury yields declined after weak retail sales and home sales data outweighed positive January job market reports.

“Refinance applications increased across all loan types, marking the strongest week for refinancing since mid-January,” Kan added.

Fed to consider changes in mortgage lending rules

The Federal Reserve is planning regulatory changes to make mortgage lending more attractive to banks after their market share has dropped sharply, Fed Vice Chair Michelle Bowman said Monday.

The problem*: Banks now originate just 35% of mortgages, down from 60% in 2008. They also service only 45% of mortgage balances, compared to 95% in 2008. Nonbanks have filled the gap.

Proposed fixes:

· Remove requirement to deduct mortgage servicing assets from regulatory capital while maintaining the 250% risk weight assigned to these assets

· Use loan-to-value ratios instead of uniform risk weights to better reflect actual risk

· Lower capital requirements to make mortgage origination cheaper for banks

Why it matters: Bowman said mortgage originations give banks stable fee income and help build customer relationships that lead to cross-selling other services. She warned that nonbank growth has outpaced regulatory safeguards, creating financial stability concerns.

The Mortgage Bankers Association welcomed the changes, saying they would help banks serve creditworthy borrowers while maintaining safety and soundness.

Average tax refund up nearly 11 percent so far this filing season. (The Hill)