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Mortgage Rates Continue to Ease: 3 mREIT Stocks to Bet on for 2026
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Key Takeaways
The mREIT industry rebounded in late 2025 as mortgage rates fell to 6.21% after multiple Fed rate cuts.
Lower rates are expected to lift purchase originations and refinancing, easing earnings pressure for mREITs.
TWO, NREF and EFC offer high dividend yields and improving financial trends as rates and volatility decline.
The mortgage REIT (mREIT) industry experienced a volatile trend throughout 2025 due to macroeconomic uncertainty. Per the Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.72% at the beginning of 2025, while it hovered in the upper-6% range for most of 2025. Further, mortgage rates slipped ahead of the September 2025 rate cut, the first this year.
As we approach the end of 2025, the mREIT industry showed signs of recovery amid stabilizing interest rates and improving economic conditions. At the close of its December meeting, the final one of the year, the Fed delivered another 25-basis-point cut. With this, the average rate on the 30-year fixed-rate mortgage slipped to 6.21% as of Dec. 18, 2025. Though the rate is still relatively higher, it marks meaningful progress from the 7.05% peak reached in January 2025.
As the Fed continues easing interest rates and bond market conditions stabilize, mortgage rates are likely to see further decline in 2026. Amid such a backdrop, investors can bet on mREIT stocks like Two Harbors Investments Corp (TWO - Free Report) , NexPoint Real Estate Finance (NREF - Free Report) and Ellington FinancialInc. (EFC - Free Report) to generate solid returns.
U.S. economic growth is expected to accelerate in 2026, with inflation moderating further and unemployment edging down. This, along with the expected interest rate cut in 2026, will gradually lower mortgage rates. With mortgage rates trending lower, both purchase originations and refinancing activity are expected to remain favorable in 2026. This will reduce earnings pressure for mREIT stocks.
Further, mortgage spreads have been gradually narrowing going into late 2025 as volatility declines and bond market conditions stabilize. With a gradual decrease in mortgage rates, improving purchase originations and refinancing activities, mREIT industry players will likely witness book value improvement in 2025 as spreads in the Agency market tighten, driving asset prices.
3 mREIT Stocks to Keep an Eye on
Investors may look to the mREIT stocks highlighted above, which combine attractive dividend yields with solid growth prospects as opportunities to deliver strong returns in 2026.
To choose these mREIT stocks, we ran the Zacks Stocks Screener to identify stocks with an expected 2026 earnings growth rate of more than 5% and a dividend yield exceeding 10%. Also, these stocks currently sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). Further, these stocks have risen more than 5% in the past six months.
Price Performance
Image Source: Zacks Investment Research
Two Harbors: The company has established an investment portfolio primarily composed of residential mortgage-backed securities (RMBS), with mortgage servicing rights (MSR) at its core. This portfolio has less exposure to changes in mortgage spreads than portfolios without MSR while maintaining the benefits of spread tightening and declining volatility. As of Sept. 30, 2025, the company’s total portfolio had 71.1% exposure to Agency RMBS.
The company primarily emphasizes generating high-quality investment returns, and its combined approach aims to maximize value extraction from MSR assets for the benefit of shareholders. It is also enhancing its investment portfolio with more revenue and hedging options. TWO’s financials have been adversely impacted by high interest rates, which hiked borrowing costs.
The company reported a net interest loss of $63.5 million for the nine months ended Sept. 30, 2025, compared with a net interest loss of $122.8 million in the prior-year period. As interest rates decline, funding costs are expected to ease, which would help narrow net interest losses and stabilize earnings over time.
The company also pays out regular dividends. TWO’s current dividend yield is 12.01%, and it has raised its dividend once over the past five years.
The company’s 2025 and 2026 earnings estimates have been unchanged over the past month and suggest year-over-year increases of 114.5% and 6.7%, respectively. TWO currently sports a Zacks Rank of #1 and has a market capitalization of $1.18 billion.
Earnings Estimates
Image Source: Zacks Investment Research
NexPoint: The company, based in Dallas, TX, originates, structures and invests in first mortgage loans, mezzanine loans, preferred equity and alternative structured financings in commercial real estate properties, as well as multi-family commercial mortgage-backed securities.
NREF continues to identify and attract investment opportunities across its target markets and asset classes with a commitment to thorough evaluation aimed at enhancing shareholder value. The company remains optimistic about the resilience of multi-family rentals and single-family homes for rent, which benefit from strong long-term housing demand trends.
The company’s net interest income increased significantly in the first nine months of 2025 to $36.1 million, up from $6.4 million in the prior-year period, reflecting an improved portfolio performance and better financing efficiency. In the year, NexPoint focused on operational resilience by originating new secured loans, while managing debt risks and maintaining funding stability. With falling mortgage rates and Fed rate cuts, NRE is likely to witness further expansion in its financials.
The company also pays out regular dividends. NREF’s current dividend yield is 13.73%, and it has increased its dividend three times over the past five years.
The company’s 2025 and 2026 earnings estimates have been unchanged over the past month and suggest year-over-year increases of 2.2% and 8.1%, respectively. NREF currently has a Zacks Rank of #2 and a market capitalization of $258.2 million.
Earnings Estimates
Image Source: Zacks Investment Research
Ellington Financial: The company invests in a diverse array of financial assets. These include residential and commercial mortgage loans and mortgage-backed securities, consumer loans, and asset-backed securities. The assets are supported by consumer loans, collateralized loan obligations, non-mortgage and mortgage-related derivatives, equity investments in loan origination companies, and other investments.
EFC is well-positioned to weather volatility in the mortgage market, supported by its diversified exposure across residential and commercial mortgage loan portfolios and strong momentum in its securitization platform. The company’s loan originations, especially in commercial mortgage bridge loans, proprietary reverse mortgages and closed-end second lien loans, continue to contribute to stable growth and income.
To navigate market uncertainty, Ellington Financial is actively leveraging dynamic hedging strategies, maintaining a broad and balanced portfolio, securing multiple sources of financing, and operating with low leverage. These measures reflect a disciplined approach to risk management and a commitment to preserving book value while adapting to shifting market conditions.
The company also pays out regular dividends. EFC’s dividend yield is 11.30%, and it has raised its dividend three times over the past five years.
The company’s 2025 and 2026 earnings estimates have been unchanged over the past month and suggest year-over-year increases of 25.3% and 1.6%, respectively. EFC has a Zacks Rank of #2 at present and a market capitalization of $1.4 billion. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings Estimates
Image Source: Zacks Investment Research
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Mortgage Rates Continue to Ease: 3 mREIT Stocks to Bet on for 2026
Key Takeaways
The mortgage REIT (mREIT) industry experienced a volatile trend throughout 2025 due to macroeconomic uncertainty. Per the Freddie Mac report, the average rate on a 30-year fixed-rate mortgage was 6.72% at the beginning of 2025, while it hovered in the upper-6% range for most of 2025. Further, mortgage rates slipped ahead of the September 2025 rate cut, the first this year.
As we approach the end of 2025, the mREIT industry showed signs of recovery amid stabilizing interest rates and improving economic conditions. At the close of its December meeting, the final one of the year, the Fed delivered another 25-basis-point cut. With this, the average rate on the 30-year fixed-rate mortgage slipped to 6.21% as of Dec. 18, 2025. Though the rate is still relatively higher, it marks meaningful progress from the 7.05% peak reached in January 2025.
As the Fed continues easing interest rates and bond market conditions stabilize, mortgage rates are likely to see further decline in 2026. Amid such a backdrop, investors can bet on mREIT stocks like Two Harbors Investments Corp (TWO - Free Report) , NexPoint Real Estate Finance (NREF - Free Report) and Ellington Financial Inc. (EFC - Free Report) to generate solid returns.
U.S. economic growth is expected to accelerate in 2026, with inflation moderating further and unemployment edging down. This, along with the expected interest rate cut in 2026, will gradually lower mortgage rates. With mortgage rates trending lower, both purchase originations and refinancing activity are expected to remain favorable in 2026. This will reduce earnings pressure for mREIT stocks.
Further, mortgage spreads have been gradually narrowing going into late 2025 as volatility declines and bond market conditions stabilize. With a gradual decrease in mortgage rates, improving purchase originations and refinancing activities, mREIT industry players will likely witness book value improvement in 2025 as spreads in the Agency market tighten, driving asset prices.
3 mREIT Stocks to Keep an Eye on
Investors may look to the mREIT stocks highlighted above, which combine attractive dividend yields with solid growth prospects as opportunities to deliver strong returns in 2026.
To choose these mREIT stocks, we ran the Zacks Stocks Screener to identify stocks with an expected 2026 earnings growth rate of more than 5% and a dividend yield exceeding 10%. Also, these stocks currently sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). Further, these stocks have risen more than 5% in the past six months.
Price Performance
Image Source: Zacks Investment Research
Two Harbors: The company has established an investment portfolio primarily composed of residential mortgage-backed securities (RMBS), with mortgage servicing rights (MSR) at its core. This portfolio has less exposure to changes in mortgage spreads than portfolios without MSR while maintaining the benefits of spread tightening and declining volatility. As of Sept. 30, 2025, the company’s total portfolio had 71.1% exposure to Agency RMBS.
The company primarily emphasizes generating high-quality investment returns, and its combined approach aims to maximize value extraction from MSR assets for the benefit of shareholders. It is also enhancing its investment portfolio with more revenue and hedging options. TWO’s financials have been adversely impacted by high interest rates, which hiked borrowing costs.
The company reported a net interest loss of $63.5 million for the nine months ended Sept. 30, 2025, compared with a net interest loss of $122.8 million in the prior-year period. As interest rates decline, funding costs are expected to ease, which would help narrow net interest losses and stabilize earnings over time.
The company also pays out regular dividends. TWO’s current dividend yield is 12.01%, and it has raised its dividend once over the past five years.
The company’s 2025 and 2026 earnings estimates have been unchanged over the past month and suggest year-over-year increases of 114.5% and 6.7%, respectively. TWO currently sports a Zacks Rank of #1 and has a market capitalization of $1.18 billion.
Earnings Estimates
Image Source: Zacks Investment Research
NexPoint: The company, based in Dallas, TX, originates, structures and invests in first mortgage loans, mezzanine loans, preferred equity and alternative structured financings in commercial real estate properties, as well as multi-family commercial mortgage-backed securities.
NREF continues to identify and attract investment opportunities across its target markets and asset classes with a commitment to thorough evaluation aimed at enhancing shareholder value. The company remains optimistic about the resilience of multi-family rentals and single-family homes for rent, which benefit from strong long-term housing demand trends.
The company’s net interest income increased significantly in the first nine months of 2025 to $36.1 million, up from $6.4 million in the prior-year period, reflecting an improved portfolio performance and better financing efficiency. In the year, NexPoint focused on operational resilience by originating new secured loans, while managing debt risks and maintaining funding stability. With falling mortgage rates and Fed rate cuts, NRE is likely to witness further expansion in its financials.
The company also pays out regular dividends. NREF’s current dividend yield is 13.73%, and it has increased its dividend three times over the past five years.
The company’s 2025 and 2026 earnings estimates have been unchanged over the past month and suggest year-over-year increases of 2.2% and 8.1%, respectively. NREF currently has a Zacks Rank of #2 and a market capitalization of $258.2 million.
Earnings Estimates
Image Source: Zacks Investment Research
Ellington Financial: The company invests in a diverse array of financial assets. These include residential and commercial mortgage loans and mortgage-backed securities, consumer loans, and asset-backed securities. The assets are supported by consumer loans, collateralized loan obligations, non-mortgage and mortgage-related derivatives, equity investments in loan origination companies, and other investments.
EFC is well-positioned to weather volatility in the mortgage market, supported by its diversified exposure across residential and commercial mortgage loan portfolios and strong momentum in its securitization platform. The company’s loan originations, especially in commercial mortgage bridge loans, proprietary reverse mortgages and closed-end second lien loans, continue to contribute to stable growth and income.
To navigate market uncertainty, Ellington Financial is actively leveraging dynamic hedging strategies, maintaining a broad and balanced portfolio, securing multiple sources of financing, and operating with low leverage. These measures reflect a disciplined approach to risk management and a commitment to preserving book value while adapting to shifting market conditions.
The company also pays out regular dividends. EFC’s dividend yield is 11.30%, and it has raised its dividend three times over the past five years.
The company’s 2025 and 2026 earnings estimates have been unchanged over the past month and suggest year-over-year increases of 25.3% and 1.6%, respectively. EFC has a Zacks Rank of #2 at present and a market capitalization of $1.4 billion. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings Estimates
Image Source: Zacks Investment Research