The path to more affordable mortgages: Why lenders hold the keys

Affordability remains one of the biggest hurdles in today’s housing market. Yes, macroeconomic forces like the Fed’s policies shape the overall rate environment, but mortgage lenders aren’t powerless passengers on this ride. In fact, you hold tangible points of influence that can directly impact borrower affordability and your own business competitiveness. The question is: are you using them?

By the end of this article, you’ll be able to answer that question and have a clear view of the market trends and lending strategies shaping your next moves.

Reading the market signals

The past 18 months have been anything but status quo — tariffs, inflation risks, and stretched consumer budgets have kept many lenders and borrowers on edge. But beneath the noise, opportunities are emerging for lenders who act proactively.

Consider what’s happening right now:

• The economy is softening. Conversations about a potential rate-loosening cycle began nearly two years ago, and momentum is building.
• 10-year Treasuries are pulling back. Mortgage rates have touched the lowest levels of the year, offering borrowers relief.
• The yield curve is normalizing. That’s not just good for economists, it means profitability in mortgage lending is beginning to stabilize.

If long-term yields track policy rates downward, we’ll likely see lower mortgage rates, easier refinancing opportunities, more affordability for new buyers, and an initial uptick in housing activity.

But here’s the nuance many overlook: mortgage rates aren’t set solely by the Fed. Lenders influence how much of the spread between mortgage-backed securities (MBS) and Treasuries is reflected in borrower rates to cover costs, manage risk, and maintain profitability.

Mortgage spreads and their impact on borrowers and lenders

Put simply, the “spread” is the gap between yields on MBS and Treasuries. 

• For borrowers: A normalizing spread can mean lower or more stable mortgage rates if it’s driven by easing short-term yields. If long-term yields rise, rates may tick up—but predictability still helps.
• For lenders: When the curve normalizes, your ability to lend profitably improves. You borrow short (via deposits and funding) and lend long (via mortgages). A healthier spread restores the incentive to lend and expands credit availability.
• For the economy: Normal spreads signal that recession risks may be easing and monetary policy is shifting toward a more balanced stance.

It’s a key driver of mortgage rates, but unlike monetary policy, lenders can influence how that spread affects borrowers through the way loans are priced, processed, and delivered to the market. The question is: how do you turn that influence into tangible affordability?

The lender’s playbook for driving affordability

Here are five actionable ways you can boost affordability for borrowers while driving stronger business performance.

1. Shorten cycle times

Every extra day between application and clear-to-close increases hedge costs, adds fallout risk, and exposes borrowers to rate changes. Tools like automated verifications, digital document collection, and fully integrated workflows can shave days off the cycle and translate directly into borrower savings and greater secondary market readiness.

2. Reduce origination costs

Origination costs have jumped 35% in the last three years. That’s unsustainable if lenders want to keep mortgages affordable. By automating underwriting, processing, and post-closing, you reduce manual steps, improve accuracy, and scale efficiently — cutting time and money from every file and passing those savings on to borrowers.

3. Eliminate redundancy

Disconnected systems force teams to re-key the same data across LOS, POS, and pricing engines — slowing you down, introducing errors, and driving up costs. A unified tech stack gives you a single source of truth so data flows once, accurately, across the process. That means an easier operation on the back end, a better experience on the front end, and stronger profitability without adding headcount.

4. Automate compliance

Compliance isn’t optional but it doesn’t have to slow you down. Manual reviews add time, inflate costs, and still leave room for error. By embedding real-time, automated compliance checks directly into the workflow, issues surface early, disclosures stay on track, and files move forward with confidence. The payoff is tangible: fewer costly errors, lower buyback risk, and faster, cleaner closings that benefit both your institution and your borrowers..

5. Expand product sets with Non-QM

Not every creditworthy borrower fits neatly into the QM box. Self-employed workers, investors, foreign nationals, and others with nontraditional income streams are underserved in the current market. Offering responsible Non-QM products not only expands your market but also creates affordability pathways for families who might otherwise be locked out of homeownership. That’s growth for your business and impact for your community.

Why invest in modern mortgage tech now?

Borrowers are watching rates and affordability closely. The market is shifting in ways that give lenders more room to maneuver, but the window won’t stay open forever. By attacking costs, compressing timelines, tightening spreads, and diversifying products, you’re not just improving your bottom line—you’re making homeownership more accessible for more families.

The keys to affordability aren’t just in Washington D.C., they’re in your hands. And lenders who are already leaning into modern mortgage technology are proving that it works:

• Shaving 5–6 days off cycle times, giving borrowers faster, more predictable closings.
• Eliminating late disclosures and improving tracking of regulatory timeframes, reducing the risk of unsellable loans.
• Consolidating 13 disparate systems into one powerful platform, cutting complexity and operational costs.
• Processing applications in nearly half the industry-average time, enabling greater efficiency and scalability.

Those results don’t just look good on a quarterly report. They directly translate into real improvements that can lower costs, reduce risk, and make homeownership more affordable and accessible for borrowers, while strengthening your business performance.

The materials available in this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your own advisors with questions regarding the content herein. The opinions expressed in this article are the opinions of the individual authors and may not reflect the opinions of MeridianLink, Inc.

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