An Intertemporal Analysis of U.S. Mortgage Market Stratification and its Systemic Implications

The epoch of unconventional monetary policy following the 2008 Global Financial Crisis (GFC), and subsequently amplified by the global COVID-19 pandemic, has fundamentally reshaped the landscape of American housing finance. An unprecedented period of near-zero interest rates and large-scale asset purchases by the Federal Reserve engendered a refinancing boom of historic proportions. This was followed by one of the most aggressive monetary tightening cycles in modern history, initiated in 2022 to combat surging inflation. The confluence of these extreme monetary regimes has sculpted a U.S. mortgage market that is now profoundly stratified, a condition visually articulated in the distribution of outstanding mortgage coupons. As of the first quarter of 2024, the market exhibits a stark bifurcation: a vast cohort of homeowners, representing more than half of all outstanding mortgages, are insulated with interest rates below 4%, while a rapidly expanding segment of recent borrowers, now constituting nearly 20% of the market, are encumbered with rates of 6% or higher. This is not merely a statistical curiosity; it is a structural feature with deep and far-reaching consequences.

This article provides a multi-faceted, theoretical, and empirical analysis of this mortgage rate stratification. We move beyond a superficial description of the data to dissect the intricate mechanisms through which this bifurcation impacts the entire financial and economic ecosystem. The central thesis is that this unprecedented dispersion of mortgage rates has created significant inertia in the housing market, altered the traditional transmission mechanisms of monetary policy, and introduced complex, latent risks onto the balance sheets of financial institutions. The analysis will probe the profound implications for secondary mortgage markets and the securitization process, examining how the valuation and risk profiles of Mortgage-Backed Securities (MBS) have been fundamentally altered. It will delve into the dual-edged sword presented to the banking sector, exploring the simultaneous suppression of prepayment risk and the acute compression of net interest margins, alongside the looming specter of refinancing risk should monetary policy reverse course. Furthermore, the macroeconomic consequences will be scrutinized, with a particular focus on the "lock-in" effect's impact on housing market fluidity, labor mobility, and the blunted efficacy of interest rate policy. Through the application of financial theory, quantitative reasoning, and economic modeling, this paper will illuminate the complex, interwoven dynamics of a mortgage market divided against itself, a legacy of a decade of extraordinary policy intervention. The exploration will extend to second-order effects, including the evolving role of home equity lending and the valuation dynamics of Mortgage Servicing Rights (MSRs), to provide a holistic perspective on the challenges and tensions embedded within the current structure of U.S. housing finance.

Section 1: The Anatomy of a Bifurcated Mortgage Market

A rigorous analysis must begin with a granular deconstruction of the historical data that has led to the present market structure. The provided chart of mortgage rate market share from Q1 2014 to Q1 2024 is a narrative of monetary policy's direct influence on household balance sheets. We can delineate this period into three distinct regimes.

Regime 1: The Post-GFC Normalization and ZIRP Era (Q1 2014 - Q1 2020)

In the initial years of the data, from 2014 through 2018, the market was still processing the aftermath of the GFC. Rates were low by historical standards, but not exceptionally so. The chart shows a healthy mix of coupons, with the 3% to 4% (light teal) and 4% to 5% (grey) bands dominating. During the brief tightening cycle of 2018, the share of mortgages with rates above 4% and 5% began to inch upward, reflecting the Federal Reserve's attempt to normalize policy. However, the share of sub-3% mortgages was negligible, a relic of a bygone era. This period represented a relatively stable, albeit low-rate, environment where the mortgage stock was not excessively skewed toward any single coupon extreme.

Regime 2: The Pandemic Refinancing Super-Cycle (Q1 2020 - Q1 2022)

The onset of the COVID-19 pandemic in early 2020 triggered a massive and immediate monetary policy response. The Federal Reserve slashed the federal funds rate to the zero lower bound and initiated a new, super-sized round of quantitative easing (QE), purchasing hundreds of billions of dollars in Treasury bonds and agency MBS. This drove mortgage rates to unprecedented lows. The 30-year fixed-rate mortgage, the benchmark for American home loans, consistently fell below 3%. The chart vividly captures the consequence: a dramatic and rapid expansion of the dark teal band (Rate < 3%). This segment, once trivial, exploded in size. Concurrently, the shares of all higher-coupon tranches—3-4%, 4-5%, and 5-6%—began to shrink precipitously. This was not due to a lack of new home sales, but rather a colossal wave of refinancing. Homeowners with existing 4% or 5% mortgages seized the opportunity to lock in a new sub-3% rate, effectively "rolling down" the coupon stack. By its peak in early 2022, the sub-3% and 3-4% cohorts combined represented the overwhelming majority—well over 75%—of the entire U.S. mortgage market. This period created the massive bloc of low-coupon debt that now anchors the market.

Regime 3: The Great Tightening and the Emergence of the High-Coupon Cohort (Q1 2022 - Q1 2024)

Beginning in March 2022, facing multi-decade highs in inflation, the Federal Reserve embarked on its most aggressive tightening cycle since the Volcker era of the early 1980s. The federal funds rate was raised at an accelerated pace, and the policy of quantitative tightening (QT) was initiated, whereby the Fed began to let its holdings of MBS and Treasuries mature without reinvestment. Mortgage rates surged in response, climbing from below 3% to over 7% at their peak in 2023.

The chart shows the dramatic effect of this regime shift. The creation of new low-coupon mortgages ceased entirely. The dark teal (<3%) band, while still enormous in absolute terms, began to decline as a percentage of the total mortgage stock due to the denominator effect (the total stock of mortgage debt was still growing, albeit slowly) and natural amortization. More importantly, the red bands (Rate 5% to 6% and Rate >= 6%) re-emerged with astonishing speed. The dark red band (>=6%), which had been virtually nonexistent from 2020 to 2022, exploded to encompass nearly 20% of the market by early 2024. This cohort consists almost exclusively of homebuyers who purchased or refinanced during the 2022-2024 period, forced to accept the prevailing high rates.

This has resulted in the current state of extreme "rate stratification." The market is now a barbell, weighted heavily at the low-coupon end by the legacy of the pandemic refinancing boom, and increasingly at the high-coupon end by recent purchase activity. The middle of the distribution (the 4-5% range) has been hollowed out. This bifurcation is the central structural feature defining the risks and opportunities across the entire housing finance ecosystem.

Section 2: Implications for Secondary Market Securitization

The U.S. mortgage market is not a simple loan-and-hold system; the vast majority of mortgages are pooled together and sold as Mortgage-Backed Securities (MBS) in the secondary market. The structure of this market, and the pricing of its securities, is exquisitely sensitive to the distribution of underlying mortgage rates. The current stratification has had profound and distinct impacts on different segments of the MBS market, often referred to as the "coupon stack."

The valuation of any MBS is fundamentally the net present value of its expected future cash flows, which consist of principal and interest payments. The core complexity arises from the prepayment option embedded in every standard U.S. mortgage, which gives the borrower the right, but not the obligation, to repay the loan at any time without penalty. This option is effectively a call option on a bond, sold by the MBS investor to the homeowner. Its value is a primary driver of MBS pricing and risk. The price of an MBS can be conceptually represented as:

P_MBS = P_StraightBond - V_CallOption

where $P_{StraightBond}$ is the price of an equivalent bond with no prepayment option, and $V_{CallOption}$is the value of the homeowner's embedded prepayment option. The value of this call option increases when interest rates fall, as the incentive to refinance grows.

A more formal valuation model discounts expected cash flows, incorporating a prepayment model:

P_MBS = Σ_{t=1 to T} [ E(CF_t) / (1 + r_t + s)^t ]

Here, $E(CF_t)$ is the expected cash flow in period $t$, which is a function of scheduled principal, interest, and, crucially, projected prepayments. $r_t$ is the risk-free discount rate for period $t$, and $s$ is the option-adjusted spread (OAS). The OAS represents the excess return an investor demands for bearing the complex risks of an MBS, most notably prepayment risk, that are not captured by the discount rate alone.

The Low-Coupon Universe: "Super-Premium" Bonds and Duration Extension

The massive cohort of mortgages with rates below 4% (and especially below 3%) now underpins a vast universe of low-coupon MBS. With current mortgage rates hovering around 7%, the refinancing incentive for these borrowers is non-existent; it is deeply "out of the money." The only source of prepayment for these securities comes from housing turnover (home sales) or borrower default. However, the very same rate differential that eliminates the refinance incentive also creates a powerful "lock-in" effect, discouraging homeowners from selling. Selling a home financed at 3% to buy another with a 7% mortgage implies a significant increase in monthly payments, even for a home of the same value.

This has several critical consequences for low-coupon MBS:

1. Minimal Prepayment Risk: Prepayment speeds on these bonds have fallen to historic lows. The embedded call option ($V_{CallOption}$) is nearly worthless. As a result, these securities behave less like traditional MBS and more like high-quality corporate bonds or other non-callable fixed-income instruments.

2. Price Behavior: These MBS trade at deep discounts to their par value. For example, an MBS pool with a 2.5% coupon will trade far below 100 cents on the dollar when benchmark rates are at 5-6%.

3. Duration Extension: Duration is a measure of a bond's price sensitivity to changes in interest rates. A common formula for modified duration is $D_{mod} = - (1/P) * (dP/dy)$, where $P$ is the bond's price and $y$ is its yield. For traditional MBS, duration is dampened by negative convexity. Negative convexity means that as yields fall, the price appreciation is capped because prepayments accelerate, shortening the bond's effective life. Conversely, as yields rise, the price decline is exacerbated as prepayments slow, lengthening the bond's life. However, for the current low-coupon MBS, this dynamic is broken. Since prepayments are already at a frictional floor, they cannot slow down much further as rates rise. This means the duration of these bonds has extended dramatically. They are now highly sensitive to interest rate increases, much more so than their historical behavior would suggest. This "duration risk" has become the primary risk for investors in these securities, replacing prepayment risk.

The High-Coupon Universe: "New Production" and Acute Prepayment Sensitivity

In stark contrast, the newly issued MBS backed by mortgages with coupons of 6% or higher represent the "current production." These securities trade at or near their par value. Their defining characteristic is acute, albeit one-sided, prepayment risk.

1. High Negative Convexity: These bonds exhibit extreme negative convexity. While a further rise in interest rates would only marginally slow their already modest prepayment speeds, any significant declinein interest rates would trigger a massive wave of refinancing. If the Federal Reserve were to cut its policy rate by, say, 200 basis points, leading to mortgage rates falling into the 5% range, nearly the entire cohort of 6%+ borrowers would have a strong financial incentive to refinance.

2. Price Capping: This prepayment risk places a hard ceiling on their potential price appreciation. As rates fall, any potential price gain is immediately offset by the increasing likelihood that the underlying high-coupon loans will be paid off early and replaced with lower-coupon loans. The MBS investor would receive their principal back at par, but would be forced to reinvest it at the new, lower prevailing rates. This is classic reinvestment risk.

3. Volatility of Spreads: The OAS on these high-coupon MBS is inherently volatile. It must compensate investors for the significant risk of rapid prepayment in a rate-cutting cycle. The market's expectation of future Federal Reserve policy is therefore a dominant factor in the pricing of these securities.

Impact on the TBA Market

The "To-Be-Announced" (TBA) market is the most liquid secondary market for MBS, allowing for forward trading of securities with specified characteristics (issuer, coupon, maturity) but not the specific underlying pools. The market's bifurcation has fragmented TBA liquidity. The trading in low-coupon TBAs (e.g., 2.5s, 3s) has thinned considerably due to a lack of new supply. The market is now concentrated in the higher-coupon, new-production TBAs (e.g., 6s, 6.5s). This fragmentation makes relative value analysis more complex and can increase transaction costs for certain strategies. Furthermore, the Federal Reserve remains a massive holder of low-coupon MBS from its QE programs. Its policy of quantitative tightening—allowing these bonds to mature and roll off its balance sheet—slowly reduces the outstanding supply, but its very presence as a non-economic holder continues to influence market pricing and liquidity.

Section 3: Bank Balance Sheet Dynamics: Refinancing Risk and Profitability

For commercial banks and depository institutions, which originate and often hold a significant portion of mortgages on their balance sheets, the stratified rate environment presents a complex and challenging operating environment. It simultaneously creates short-term stability in cash flows while introducing significant long-term structural risks to profitability and solvency.

Net Interest Margin (NIM) Compression

A bank's core profitability is driven by its Net Interest Margin (NIM), the difference between the interest income it generates from assets (like loans) and the interest it pays on liabilities (like deposits). The formula is:

NIM = (Interest Revenue - Interest Expense) / Average Earning Assets

The current mortgage distribution profoundly impacts both sides of this equation.

• Asset Side Drag: A substantial portion of bank balance sheets is now occupied by the portfolio of low-coupon mortgages originated or purchased between 2020 and 2022. These assets, yielding 3-4% or less, generate a fixed and stubbornly low stream of Interest Revenue. Due to the lock-in effect, the prepayment rate on this portfolio is exceptionally low. This means the bank cannot "churn" its book—it cannot benefit from the natural process of old loans paying off and being replaced by new, higher-yielding loans. The bank is effectively stuck with a large, underperforming legacy asset portfolio.

• Liability Side Pressure: In the high-rate environment that began in 2022, the Federal Reserve's tightening has forced banks to significantly increase the rates they pay on deposits to prevent capital flight to higher-yielding alternatives like money market funds and Treasury bills. This has caused a sharp increase in Interest Expense.

The combination of stagnant, low-yielding assets and rapidly repricing, high-cost liabilities results in severe and persistent NIM compression. This dynamic has been a primary driver of reduced profitability for many regional and community banks whose business models are heavily reliant on traditional lending.

Unrealized Losses and Interest Rate Risk

Beyond the impact on income statements, the rate stratification has created a significant issue on bank balance sheets. The fair market value of a fixed-income asset is inversely related to prevailing interest rates. The price sensitivity can be approximated by the duration formula:

ΔP/P ≈ -D_mod * Δy

where ΔP/P is the percentage change in price, $D_{mod}$ is the modified duration, and Δy is the change in yield.

For a mortgage portfolio with a weighted average coupon of 3.5% and a long effective duration (due to the aforementioned lack of prepayment), a 300 basis point (Δy = 0.03) increase in market yields can lead to a substantial decline in market value. For many banks, these mortgages are classified as "Held-to-Maturity" (HTM) for accounting purposes, meaning they are carried on the books at their original cost and do not have to be marked-to-market. While this accounting treatment protects regulatory capital in the short term, it masks a significant underlying economic reality: a large, unrealized loss on the asset portfolio. This was the exact vulnerability that precipitated the failure of Silicon Valley Bank in 2023. While SVB's issues were concentrated in long-duration Treasury bonds, the principle is identical for a bank holding a large portfolio of low-coupon mortgages. The economic value of the bank's equity is impaired, even if regulatory capital appears sound.

The Latent Threat of Refinancing Risk

While the current environment of low prepayments provides stable and predictable cash flows from the mortgage portfolio, it masks a significant latent risk: a future surge in refinancing. This risk is concentrated in the cohort of borrowers with rates of 6% or higher. For the banks or MBS investors holding these loans, the income stream is attractive today. However, this income stream is highly vulnerable to a monetary policy pivot.

Prepayment behavior is often modeled using an S-curve, which relates the conditional prepayment rate (CPR) to the borrower's rate incentive. The incentive can be defined as:

Incentive = (WAC - r_current)

where WAC is the Weighted Average Coupon of the mortgage pool and $r_{current}$ is the currently available mortgage rate.

• For the >50% of borrowers with WACs below 4%, the Incentive is deeply negative (e.g., 3.5% - 7.0% = -3.5%). They are at the absolute bottom of the S-curve, with prepayment rates near zero.

• For the ~20% of borrowers with WACs of 6.5% or higher, the Incentive is currently also negative or near zero. They too are at the bottom of the S-curve.

However, should the Federal Reserve cut rates to combat a future recession, and current mortgage rates fall to, for example, 5.0%, the Incentive for the high-coupon cohort becomes highly positive (e.g., 6.5% - 5.0% = +1.5%). This would move them rapidly up the steepest part of the S-curve, triggering a wave of refinancing. For the financial institutions holding these loans as assets, this would mean a sudden loss of their highest-yielding assets, which would be repaid at par and need to be reinvested at the new, lower market rates. This is a classic form of reinvestment risk and would lead to a sudden and sharp decline in net interest income. Thus, while banks are currently suffering from NIM compression, a sharp rate-cutting cycle would not be a simple panacea; it would merely trade one set of problems for another.

Section 4: Macroeconomic Consequences of Mortgage Rate Stratification

The unusual structure of the mortgage market does not only affect financial institutions; it has profound and pervasive effects on the broader macroeconomy, altering household behavior, market dynamics, and the effectiveness of public policy.

The "Lock-In" Effect: Paralyzing the Housing Market and Impeding Labor Mobility

The most direct macroeconomic consequence is the "lock-in" effect. A homeowner with a 3% mortgage faces an enormous financial disincentive to sell their home and purchase another, as doing so would require forfeiting their cheap debt and taking on a new mortgage at a rate of 6% or 7%. This effect has functionally frozen a significant portion of the housing market's existing inventory.

The immediate result has been a collapse in the number of existing home sales. Potential sellers—from empty-nesters looking to downsize to growing families needing more space—are choosing to stay put rather than accept a dramatically higher monthly housing payment. This has created a severe shortage of inventory on the market. This supply constraint, in the face of persistent underlying demand for housing, has kept home prices stubbornly high, even in the face of the highest mortgage rates in two decades. This paradox of high rates and high prices has crushed housing affordability, particularly for first-time buyers who have no existing low-rate mortgage to protect them and no home equity to use for a down payment. A vicious cycle ensues: the lack of existing inventory pushes more demand toward new construction, but the high cost of financing and materials limits the ability of builders to fully close the supply gap.

Beyond the housing market itself, this lack of fluidity has potential consequences for the labor market. The decision to relocate for a better job opportunity is a complex one, involving social and financial calculations. The lock-in effect adds a massive financial friction to this calculation. An individual offered a higher-paying job in another city may decline the offer if the salary increase is insufficient to offset the financial shock of moving from a 3% mortgage to a 7% mortgage. This can lead to a less efficient allocation of labor resources across the economy, reduce labor market dynamism, and potentially restrain productivity growth over the long term.

The Blunted Transmission Mechanism of Monetary Policy

Central banks conduct monetary policy by adjusting a key policy rate (the federal funds rate in the U.S.), which then "transmits" through various channels to the broader economy to influence aggregate demand. One of the most critical of these is the interest rate channel, which affects the cost of borrowing for households and businesses. The current mortgage stratification severely blunts this channel.

The Federal Reserve's rate hikes were intended to cool the economy by increasing borrowing costs, thereby reducing household disposable income and discouraging spending. However, for the more than 50% of mortgage holders with fixed rates below 4%, their single largest monthly payment is entirely unaffected by the Fed's actions. Their financial situation is insulated from the direct impact of monetary tightening. This means the entire burden of the policy adjustment must be borne by a much smaller segment of the economy: renters (who face rising rents), prospective homebuyers, businesses seeking new investment capital, and households reliant on variable-rate debt like credit cards.

This can be understood through the lens of a standard intertemporal consumption model, such as the Euler equation:

u'(c_t) = β E_t[ (1 + r_t) u'(c_{t+1}) ]

This equation states that the marginal utility of consumption today, $u'(c_t)$, should equal the discounted expected marginal utility of consumption tomorrow. The real interest rate, $r_t$, is the key price that governs this trade-off. For the majority of homeowners, their effective borrowing rate $r_t$ is fixed and low, and thus their intertemporal consumption decision is not being influenced by the Fed's policy changes as intended. This insulation forces the central bank to be more aggressive in its rate hikes than it otherwise would need to be to achieve the same level of aggregate demand reduction, potentially increasing the risk of causing a sharp recession in the more interest-rate-sensitive sectors of the economy.

Wealth Effects and Economic Inequality

The situation creates a new axis of economic inequality. On one side are established homeowners who locked in both low-cost debt and significant housing price appreciation. They benefit from a form of imputed income: the difference between their low mortgage payment and what they would have to pay to rent a similar property. This acts as a buffer supporting their consumption. On the other side are renters and prospective buyers who face record-low affordability and are effectively locked out of the wealth-building opportunities of homeownership. This exacerbates intergenerational wealth gaps, as younger cohorts find it increasingly difficult to enter the housing market. The lock-in effect also traps housing equity. While a homeowner with a 3% mortgage may be sitting on hundreds of thousands of dollars in paper gains, that wealth is illiquid. They cannot easily access it by selling the home without incurring a massive financial penalty in the form of a higher mortgage rate, thus muting the traditional "wealth effect" on consumption that might otherwise be expected from rising home prices.

Section 5: Additional Dimensions and Second-Order Effects

The complexities of the stratified mortgage market give rise to several second-order effects and strategic responses from both consumers and financial institutions.

The Rise of Home Equity Lending

While the lock-in effect prevents homeowners from selling or conducting a "cash-out refinance" of their primary mortgage, it does not prevent them from tapping into their accumulated home equity through other means. This has created a fertile ground for the growth of second-lien products, such as Home Equity Lines of Credit (HELOCs) and fixed-rate home equity loans. A homeowner can keep their valuable sub-3% first mortgage intact while borrowing against their home's equity at a higher, market-based rate (often in the 8-10% range).

For banks, this represents a crucial strategic pivot. Unable to generate new, high-quality mortgage loans at sufficient volume, they can instead shift their lending focus to their existing customer base's trapped equity. This offers an attractive source of new, higher-yielding assets to help offset the drag from their legacy mortgage portfolios.

However, this trend reintroduces interest rate sensitivity to household balance sheets through the back door. Most HELOCs are variable-rate products tied to a benchmark like the Prime Rate, which moves in lockstep with the federal funds rate. Households that were previously insulated from monetary policy by their fixed-rate first mortgages become exposed once again when they take on a HELOC. This could partially restore the effectiveness of the monetary policy transmission channel, but it also adds a new layer of credit risk to bank balance sheets, particularly if an economic downturn were to coincide with high rates, pressuring the ability of these borrowers to service multiple loans.

The Evolving Role and Valuation of Mortgage Servicing Rights (MSRs)

Mortgage Servicing Rights (MSRs) are a unique and often misunderstood asset class. An MSR is the contractual right to service a mortgage—collect payments, manage escrow, handle delinquencies, etc.—in exchange for a fee, typically a small percentage of the outstanding loan balance annually (e.g., 0.25%). MSRs are created during the loan origination process and are often sold by originators to specialized servicers or retained by banks.

The value of an MSR is the present value of the future fee stream. Its key risk is prepayment: when a loan is prepaid, the MSR asset is extinguished, and the future fee stream disappears. A simplified valuation model is:

V_MSR = Σ_{t=1 to T} [ E(Fee_t - Cost_t) / (1 + d)^t ]

where E(Fee_t - Cost_t) is the expected net servicing income in period $t$ and $d$ is the discount rate. The expectation $E$ is heavily dependent on the projected prepayment speed.

Because of this, MSRs have a duration profile opposite to that of traditional bonds; their value increases as interest rates rise. When rates rise, prepayment speeds slow down, extending the life of the fee stream and thus increasing the MSR's value. This makes MSRs a powerful natural hedge for mortgage originators and holders. As rates rise, the value of the loans on their books falls, but the value of their MSR assets rises, offsetting the loss.

The current market stratification has created a tale of two MSRs:

1. MSRs on Low-Coupon Loans: These are now exceptionally valuable. With prepayment risk near zero, their cash flow streams are viewed as long-duration, stable annuities. Their value has surged in the high-rate environment, providing a significant capital and earnings boost to the banks and non-bank servicers that hold them.

2. MSRs on High-Coupon Loans: These are much riskier and more volatile assets. Their value is highly sensitive to a potential drop in interest rates. A significant rate rally would lead to a refinancing wave, which would cause the value of these MSRs to plummet. Hedging the value of these MSRs is a complex and critical activity for their owners.

The bifurcation in MSR valuation reflects the bifurcation in the underlying loans, adding another layer of complexity and risk management challenges for the housing finance industry.

Forward-Looking Perspectives and Unresolved Tensions

The analysis reveals a U.S. housing finance system characterized by deep structural tensions and inertia. The path to normalizing this stratified market is neither short nor straightforward; it will likely require a full housing cycle, spanning perhaps a decade or more, of home turnover, gradual amortization, and potential refinancing waves to smooth out the extreme coupon distribution. The key question for policymakers, financial institutions, and households is how the unwind of this unique structure will manifest. The future trajectory of interest rates serves as the primary catalyst that will determine which of the system's latent risks are realized. A prolonged period of high rates will continue to strain housing affordability and suppress market activity, potentially calcifying the economic divisions created by the lock-in effect. Conversely, a rapid and deep cutting cycle, while offering relief to recent borrowers, would trigger a violent repricing of prepayment risk across the MBS and MSR markets, presenting a significant challenge to holders of high-coupon loans and their associated servicing rights. The system's resilience is yet to be fully tested against a significant economic downturn or a sharp reversal in monetary policy, and the interplay between the market's entrenched inertia and future economic shocks will define the landscape of housing finance for years to come.