Episode summary
Inside Economics Podcast #303- Bending, Not Breaking
Summary
John Toohig argues that lending is still holding up, but the pattern is shifting: 2026 has been strong in the first half and weaker in the second, with higher rates starting to bite in residential mortgages and commercial real estate. He says whole loan trading is a large but still manual market, used by banks and other depositories to manage balance sheets, take gains, or shed assets after mergers.
Toohig sees the mortgage market as better than in the 2022-23 shock, when rapid rate hikes froze activity, but he expects higher rates to keep pressure on originations and extend-and-pretend dynamics in CRE. The host and Chris Redies push the idea that if the 10-year Treasury can settle back into the mid-fours, that would help mortgages and CRE, though probably not create a new housing boom.
The biggest bright spot is HELOCs, which Toohig says are growing 13.3% year over year as locked-in homeowners tap equity instead of refinancing. He is less worried about consumer credit than about deposit flight, cyber risk, and stablecoins, while noting that banks are already getting more aggressive about rates and funding costs. Looking further out, he expects more digital loan processing, but says the industry is still years away from full automation.
Key takeaways
- Toohig says whole loan trading is running strong enough to look at about a trillion dollars of loans a year, but activity is slowing into the fourth quarter.
- HELOCs are the fastest-growing product in his world, up 13.3% year over year, because homeowners are locked into low-rate mortgages and need cash without refinancing.
- Residential mortgages are weaker than earlier in the year, but Toohig says the market is still far healthier than during the 2022-23 rate shock.
- Commercial real estate is showing renewed activity, including office, but he thinks rising cap rates and higher financing costs will keep pressure on the sector.
- Deposit flight and cyber risk are real concerns, especially if AI and higher rates make it easier for customers to move money quickly.
- He expects more digitalization of loans over the next 5 to 10 years, but not full automation soon because core systems are still behind.
Notable quotes
“this year in particular seems to be it's it's kind of shaping up to be a first half really good”
“Second half slowing down kind of story”
“HELOCs are certainly having their moment”
“we've talked around it. It is a loan product and I'm going to say the number is 47%”
“Bends not break”
Topics
- whole loan trading
- bank lending health
- consumer credit
- mortgages
- commercial real estate
Companies and tickers mentioned
- RJF
- MCO
- Raymond James
- Moody’s Corporation
Watch the episode
Watch “Inside Economics Podcast #303- Bending, Not Breaking” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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