What's ahead for mortgage rates in 2026?

Mortgage rates ended 2025 at their lowest point all year, and that's great news for homebuyers and homeowners looking to refinance.

The average rate on a 30-year fixed rate conventional loan fell to 6.14% as of January 2nd.  You can see what rates we're offering by signing up for our Friday rate texts. 

But as we look ahead in 2026, the question on everyone's mind is... where are rates heading? 

The short answer is that rates are unlikely to move back higher to the 6.5%+ range and we don’t need a recession or a crisis to move lower. They just need the economic pressure that pushed them higher to continue easing — and that process is already underway.

GDP is strong but the economy may still be slowing in 2026. Consumer spending has cooled, hiring has slowed, and businesses are behaving more cautiously. That matters because when growth moderates, investors are willing to accept lower long-term yields. Money gradually shifts toward bonds and away from risk, which puts downward pressure on longer-term interest rates, including mortgage rates.

At the same time, inflation doesn’t need to fall dramatically. It just needs to stay contained and predictable as we saw in the most recent inflation report. Tariffs have not had the negative impacts that many believed they would. When inflation stops surprising to the upside, markets remove the extra “just in case” premium that was built into long-term rates during 2022–2024. That alone can allow rates to drift lower over time.

There’s also a structural change happening inside the Federal Reserve in 2026. Jerome Powell’s term as Fed Chair ends in May, and markets will price that transition well before it officially happens. Powell’s Fed has been unusually tolerant of keeping rates restrictive even as growth slowed. A new Chair will likely be more aligned with Trump's desire to cut rates quickly is far, meaning a bias toward earlier and more aggressive rate cuts. A more aggressive Fed will lead to lower mortgage rates.

None of this points to a return to ultra-low pandemic-era rates. But it does support a scenario where mortgage rates in 2026 are modestly lower and more stable than what borrowers dealt with in 2024 and early 2025. Many analysts predict rates to fall about 0.5%-1.0% from where they are today by the end of 2026.

For buyers, that means improving affordability while inventory remains elevated and sellers stay negotiable. For homeowners, it suggests refinance opportunities may appear gradually rather than all at once.

The takeaway is simple: the forces that pushed mortgage rates higher are fading, and the next phase of policy is likely more accommodative. That combination is enough to support slightly lower rates — without needing anything dramatic to happen.

Don't forget - past LendFriend clients have access to our Rate Rebound program and can enjoy a low-cost refinance.