Demand for all types of residential mortgages was significantly weaker, while lending standards for most were essentially unchanged1 in the third quarter of 2026, according to the recent release of the Senior Loan Officer Opinion Survey (SLOOS). For commercial real estate (CRE) loans, lending standards for construction & development were moderately tighter, while multifamily loans were modestly tighter. Compared to the previous quarter, demand for construction & development and multifamily loans was also significantly weaker.
The Federal Reserve held their key short-term interest rate (i.e., Fed Funds) steady at a target range of 3.75% to 4.00% during their October meeting, after a 25 basis point rate hike in September. Since Chairman Warsh has begun presiding over the Fed, the phrase “The Committee will deliver price stability” has appeared in all four press release statements after each Federal Open Market Committee (FOMC) meeting. This is signaling a more hawkish direction for monetary policy, especially given current inflation levels. As a result, NAHB is forecasting a rate hike during the December meeting which will precipitate a lengthy pause.
Residential Mortgages
In the third quarter of 2026, four of seven residential mortgage loan categories saw a positive2 net easing index for lending conditions: Non-Qualified Mortgage (QM) jumbo, QM jumbo, non-QM non-jumbo, and QM non jumbo non-GSE-eligible. An additional two (Government and GSE-eligible) recorded a neutral reading (i.e., near 0). Subprime was the only residential mortgage loan category to record a negative value (-20.0), the lowest reading since the first quarter of 2023.
All seven residential mortgage loan categories reported significantly weaker demand in the third quarter of 2026, with six having a net percentage of -30% or lower. The average net easing index value (-32.2) across all seven residential mortgage categories is the lowest since Q4 2023 (-49.0).
Commercial Real Estate (CRE) Loans
For the CRE loan categories, multifamily and construction & development loans registered net easing indices of -8.8 and -15.5 , respectively, in the third quarter of 2026. x In both cases, this represented the lowest reading in two years.
The net percentage of banks reporting stronger demand was -25.9% and -22.8% for construction & development and multifamily loans, respectively, with a negative number indicating weaker demand. Both CRE categories experienced their lowest net demand percentages in over two years.
- The Federal Reserve uses the following descriptors when analyzing results from the survey which will be used, in principle, within this blog post as well:
– “Remained basically unchanged” means that the change or actual reading is greater than or equal to 0 and less than or equal to 5 percent.
– “Modest” means that the change or actual reading is greater than 5 and less than or equal to 10 percent.
– “Moderate” means that the change or actual reading is greater than 10 and less than or equal to 20 percent.
– “Significant” means that the change or actual reading is greater than 20 and less than or equal to 50 percent.
– “Major” means that the change or actual reading is greater than or equal to 50 percent.
- A value above zero (i.e., positive) indicates that lending conditions are easing while a value below zero (i.e., negative) indicates that lending conditions are tightening.