Mortgage Rates Forecast 2026: Will Mortgage Rates Go Down?

Mortgage rates have dominated housing headlines for most of the past 3 years, and as we head toward 2026, one question keeps coming up: will mortgage rates go down in 2026—and if they do, will it actually matter?

As of December 2025, the average 30‑year fixed conventional mortgage rate sits around 6.2%—which is notably a more than three‑year low. Rates haven’t been this low since early 2022, before the Federal Reserve began its aggressive hiking cycle, and meaningfully lower than the peaks of 2023–2024. While 6.2% is still a far cry above the ultra‑low rates from the pandemic era. The consensus view heading into 2026 is clear: rates are likely to drift lower—but probably not enough to fundamentally change affordability.

This mortgage rates forecast for 2026 looks at where rates are likely heading, why meaningful relief may be limited, and what buyers and homeowners should realistically plan for. Inflation is cooling. The labor market is slowing. The Federal Reserve is closer to cutting than hiking. And yet, mortgage rates remain stubbornly elevated.

So what should homebuyers and homeowners actually expect? Let’s break it down.

Mortgage Rate Predictions for 2026

Most economists and housing forecasters expect mortgage rates in 2026 to fall modestly, not dramatically. The prevailing outlook places the average 30‑year fixed rate in the mid‑5% to low‑6% range by the end of the year. It’s important to note that this refers to the national average across all borrowers. Highly qualified borrowers—those with strong credit scores, low debt‑to‑income ratios, stable income, and solid down payments—typically secure rates that are about 0.25% to 0.50% lower than the average. In practice, that means while the average borrower may see rates around 6.0%, top‑tier borrowers could realistically be locking rates in the mid‑5% range under the same market conditions.

Across major forecasts, the common theme is gradual improvement:

Rates easing by roughly 0.5% to 1.0% from late‑2025 levels Mortgage rates spending much of 2026 between 5.75% and 6.25% Short‑lived dips below 5.75% are possible, but unlikely to be sustained

What’s notably absent from every credible forecast is a return to 3% or 4% mortgage rates. Those rates were a byproduct of emergency monetary policy and a once‑in‑a‑generation economic shock. They are not the baseline going forward.

If you’re researching mortgage rate predictions 2026 hoping for a dramatic reset, the reality is more restrained. Rates may improve—but they’re expected to remain historically normal rather than historically cheap.

Why Mortgage Rates Are Staying Elevated in 2026

Before getting into forecasts and Fed politics, it’s important to understand how mortgage rates are actually set.

At a basic level, mortgage rates are made up of two components:

The 10-Year Treasury yield, which reflects expectations for inflation, economic growth, and monetary policy over time A spread on top of that yield, which compensates investors for the added risk, volatility, and illiquidity of mortgage-backed securities

When people ask why mortgage rates haven’t fallen more aggressively, the answer almost always lives in one of those two buckets.

What Drives the 10-Year Treasury Yield and How Does it Impact Mortgage Rates

The 10-Year Treasury isn’t controlled directly by the Federal Reserve. It’s shaped by market expectations around a few core variables:

Inflation expectations. Even though inflation has cooled meaningfully, markets are still cautious about declaring victory. Investors don’t just look at where inflation is today—they focus on where it could go next. Recent data has helped on that front: the latest CPI report showed inflation running at 2.7%, well below the 3.1% expectation, reinforcing the idea that price pressures are continuing to ease.

At the same time, some of the inflation risks markets feared earlier—particularly around tariffs—have so far come in smaller and less disruptive than expected. That has reduced near-term inflation anxiety. Still, as long as investors believe inflation could reaccelerate due to fiscal stimulus, supply shocks, or renewed consumer strength, they demand higher long-term yields as protection. That lingering caution keeps upward pressure on the 10-Year Treasury and, by extension, mortgage rates.

The labor market. Employment data plays a critical role in rate markets because labor drives wage growth, and wages feed inflation. While the job market has remained resilient, cracks are becoming more visible. Layoffs have increased across technology, finance, and professional services, and the unemployment rate has been gradually drifting higher.

There’s also growing concern about the longer-term impact of AI-driven efficiency. Companies are learning they can do more with fewer people, which introduces structural risk to employment growth even outside of a traditional recession. That dynamic makes investors more cautious about future economic growth.

A cooling labor market reduces wage pressure and increases the likelihood of Fed rate cuts, both of which tend to push long-term Treasury yields lower. If unemployment continues to rise and job openings contract, markets will likely price in slower growth—and that is one of the clearest paths to lower mortgage rates in 2026.

Federal Reserve policy. While the Fed sets short-term rates, its guidance influences how markets price the future path of inflation and growth, which feeds directly into the 10-Year yield.

Following its December meeting, the Fed’s official projections show just one rate cut in 2026. That expectation alone puts a floor under long-term yields and limits how far mortgage rates can fall in the near term.

That said, those projections are being done before a major potential shift at the Fed that could have significant policy impacts.

Jerome Powell’s term as Fed Chair ends in May 2026, and with Donald Trump demanding lower mortgage rates ASAP, markets widely expect that Trump's likely next appointee to run the Fed, Kevin Hassett, who is also a longtime Trump economic advisor and vocal advocate for lower interest rates, will attempt to force the Fed to continue to cut. A Hassett-led Fed would almost certainly push harder for rate cuts than the current committee.

Whether that translates into materially lower mortgage rates is less certain. Even a more rate-cut-friendly Fed still has to contend with inflation data, Treasury supply, and bond market discipline.

The Mortgage Rate Spread Problem

Even if Treasury yields fall, mortgage rates don’t automatically follow.

The Federal Reserve controls short‑term interest rates, not mortgage rates. Mortgage rates are driven primarily by long‑term bond markets, especially the 10‑Year Treasury yield. In 2025, Treasury yields stayed higher than many expected—even as inflation cooled and the Fed began easing. That disconnect is why mortgage rates barely moved despite rate cuts.

Mortgage rates trade at a spread above Treasuries, and that spread has been unusually wide since 2022. Reduced Fed support for the mortgage-backed securities market, heightened volatility, and investor risk aversion have all pushed that spread higher.

As a result, mortgage rates can stay elevated even when the Fed cuts rates or Treasury yields drift lower.

Until both long-term Treasury yields fall and MBS spreads normalize, mortgage rates are likely to improve slowly rather than collapse lower.

What a Lower Rate Actually Means for Buyers

Let’s quantify the impact of lower mortgage rates using a common scenario.

$500,000 loan | 30‑year fixed conventional mortgage

A half‑percent drop from 6.0% to 5.5% saves about $159 per month. A full percentage point drop saves about $314 per month.

Those savings matter—but they don’t transform affordability.

When home prices are elevated, a 5%–10% payment reduction helps at the margin. It can improve qualification, free up monthly cash flow, or make a borderline purchase workable. But it doesn’t offset years of price appreciation.

That’s why buyers waiting for rates to fall before acting may be disappointed. Even if mortgage rates fall in 2026, the change is unlikely to redefine the housing market on its own.

There’s also a strategic risk to waiting. Today’s market still features relatively low demand compared to recent years, which gives buyers leverage that tends to disappear quickly once rates fall. If you find the right home, it may not be worth losing it while waiting for marginal rate relief—especially when affordability can often be improved through price reductions or seller concessions.

In many cases, negotiating seller-paid closing costs, temporary interest rate buydowns, or outright price cuts can have a more immediate impact on your monthly payment than waiting months for a 0.25%–0.50% rate drop. Once rates fall and buyer demand returns, those concessions tend to dry up fast. Acting while rates are still high—but competition is lower—can actually put buyers in a stronger negotiating position.

Refinancing in 2026: The Cost of Waiting

Homeowners face a different decision than buyers: refinance now or wait. This question comes up constantly, especially among homeowners who locked in rates in the mid-6% to low-7% range over the last few years and are now watching rates slowly drift lower.

The instinct to wait is understandable. If mortgage rates are expected to fall further in 2026, it feels logical to hold out for the absolute bottom. The problem is that mortgage math doesn’t reward patience the way most people think it does. Every month you wait, you’re still making higher payments—real dollars leaving your bank account—while hoping for relatively small incremental rate improvements.

That tradeoff is easy to underestimate. Waiting often feels harmless, but it quietly erodes savings month after month. To show how this plays out in the real world, let’s walk through a common scenario.

Option 1: Refinance Now from 6.75% to 5.75%

Monthly payment drops from ~$3,243 to ~$2,918 Monthly savings: ~$325 Savings start immediately

Option 2: Wait Until April 2026 to refinance from 6.75% to 5.50%

Monthly payment becomes ~$2,839 Monthly savings vs original loan: ~$404

Additional savings vs 5.75% refi: ~$79 per month

Saving $79 more per month sounds nice in theory, but if you're doing the math than waiting four months to close costs roughly:

$325 × 4 months = $1,300 in lost savings

At $79 per month of additional, it takes over 16 months just to break even. Over a year! You might already be on to your next refinance before you're able to recoup the savings.

That’s assuming rates actually hit 5.50%—which is not guaranteed.

This is why waiting for the “perfect” refinance rate often backfires. Small rate improvements rarely justify months of higher payments.

For many borrowers, refinancing when meaningful savings are available—and using low‑ or no‑closing‑cost options—creates far better outcomes.

VA Borrowers: IRRRLs Matter in 2026

Veterans have a unique advantage if mortgage rates fall, and that advantage becomes especially powerful in a slow, incremental rate environment like the one most economists expect in 2026.

The VA Interest Rate Reduction Refinance Loan (IRRRL)—often called a VA streamline refinance—was built specifically for moments like this. It allows eligible VA borrowers to reduce their interest rate and monthly payment with minimal documentation, no appraisal in most cases, and limited out-of-pocket costs. The goal is simple: lower the veteran’s payment, not re-underwrite their entire financial life.

That matters because when rates decline gradually—as opposed to collapsing all at once—VA borrowers don’t need to wait for a dramatic move to benefit. Even modest rate drops can be captured efficiently through an IRRRL, often without resetting the loan term or significantly increasing the balance.

Another important advantage is flexibility. Many VA IRRRLs can be structured with little to no closing costs, which reduces the risk of refinancing “too early.” If rates continue to fall later in 2026, veterans may still have the option to refinance again without having sunk significant money into fees upfront.

In a market where timing is uncertain and rate relief is expected to be incremental, VA homeowners should be among the first borrowers positioned to benefit when mortgage rates ease.

Final Takeaway: Strategy Beats Timing

The most honest mortgage rates forecast for 2026 looks like this:

Rates are likely to decline modestly Expect roughly 0.5%–1.0% of relief Affordability improves slightly—not dramatically Waiting for perfection carries real costs

For buyers, the right move is finding a home that works at today’s rates and treating future rate drops as upside—not a prerequisite.

For homeowners, refinancing should be driven by math, not headlines. If you can meaningfully reduce your payment or long‑term interest, waiting for marginal improvements often costs more than it saves.

At LendFriend, we help borrowers model real scenarios—not best‑case fantasies. Whether you’re buying, refinancing, or planning ahead, we’ll walk through your numbers honestly and help you make a decision that fits your financial reality.

Mortgage rates may improve in 2026—but smart strategy will matter more than perfect timing. Schedule a call with me today or get in touch with me by completing this quick form and I’ll help you find the strategy that works best for you.