A new report published this week by Fitch Ratings offered a cautiously optimistic perspective on the outlook for global structured finance markets, as projections of economic activity in the second half of 2026 look increasingly Iran-war dependent.
The global ratings firm presented a bullish outlook compared to widely shared though shifting views that the U.S. central bank may hold the federal funds rate at current levels through the end of this year.
“In the U.S., a cooling labor market and slowing wage growth should lead the Federal Reserve to cut rates twice in 2026,” said Fitch, “although the risk of fewer cuts this year is increasing as inflation rises in response to the energy price shock.” The report said “the risk of oil prices remaining much higher for longer has increased” since March.
Aggregate household mortgage debt exceeded $13 trillion at the end of 2025, according to Federal Reserve Bank of New York data, making U.S. lending and residential mortgage-backed securities (RMBS) the engine of global structured finance markets.
“Tariff and oil-related inflationary pressures may lead to slower or less impactful policy easing from the Federal Reserve and keep mortgage rates higher for longer,” noted Fitch. “This will keep pre-2022 vintage prepayment rates below historical averages, with RMBS notes remaining outstanding for longer and slowing the build-up of credit enhancement.”
Foreign ownership of outstanding U.S. government-underwritten mortgage debt was $40 billion higher over the year in January at about $1.4 trillion, or 14% of outstanding so-called “agency” debt, according to Ginnie Mae data.
Japan, Europe and Taiwan lead foreign RMBS holders, with $276 billion, $239 billion and $187 billion as of January, respectively. Fitch left asset performance projections “neutral” for a majority of structured finance sectors, though it noted “the proportion of sectors with a ‘deteriorating’ outlook increased to 44% in April from 33% in December 2025.”
Fitch maintained its March forecast that global economic growth, relevant to assessing global appetite for U.S. RMBS, would decline 10 basis points from 2025 levels to 2.6% by year end “as the world economy continues to hold up well despite a succession of geopolitical and policy shocks.”
“Asset performance for non-prime RMBS sectors in the U.S. will deteriorate further in 2026 as more vulnerable borrowers continue to be affected by macroeconomic volatility,” the company cautioned, referring to stress in non-qualified mortgage (non-QM) loans outside government-backed underwriting guidelines that Fitch has previously flagged.
Stress among borrowers with loans insured by the Federal Housing Administration has remained elevated, while loan performance among conventional borrowers who qualify for financing backed by Fannie Mae and Freddie Mac has been historically strong, despite multiple years of rising household cost pressures.
“While prime collateral impairments have also increased, the absolute magnitude of the change remains limited given the very modest baseline,” said Fitch.
Marginal borrowers will nevertheless likely face broader cash-flow stress linked to economic fallout from the Iran war, Fitch forecasts, as inflationary pressures stress household budgets and contractionary pressures hit employers’ monthly outlays, making labor market disruptions more likely the longer the war lasts.
“North American credit card performance will also come under pressure from the effects of rising costs of living and elevated interest rates,” the report added.
