Mortgage interest rates could continue their slow decline in 2026, experts say.
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Mortgage interest rates have been falling lately, hovering near their lowest level in three years in recent weeks.
While further declines would be welcomed by borrowers, the likelihood of those is unclear. The Federal Reserve opted for its second consecutive rate cut on October 29, but inflation and rising unemployment — which are hard to accurately measure amid the government shutdown — could threaten any further rate cuts down the line.
Does that mean mortgage interest rates will rise in 2026, however? Or will they continue the decline we've seen for much of 2025? We spoke with some experts to see what they're predicting for mortgage rates in the new year.
Start by seeing how low your current mortgage rate offers are here.
What are the mortgage interest rate predictions for 2026?
The Fed doesn't directly determine the trajectory of mortgage rates, though they do tend to move in the same direction. For example, as markets prepared for potential rate cuts in September, the average 30-year mortgage rate fell to 6.13%. And while they rose slightly in October they stayed within the low 6% range.
Future rate cuts are now uncertain, though, which could inject some uncertainty into the mortgage rate space.
"The Fed is in a tough position right now, as it has to weigh uncertainty on more fronts than you can count — quirky labor market statistics, sticky inflation in pockets, unknown economic tailwinds related to tariffs and trade deals, and record levels of credit card debt, just to name a few," says Mike Nielsen, sales manager at Churchil Mortgage Corporation.
Fed Chairman Jerome Powell even called out this uncertainty following the bank's October meeting.
"What do you do if you're driving in the fog? You slow down," Powell said. "There's a possibility that it would make sense to be more cautious … I'm not committing to that. I'm just saying it's certainly a possibility that you would say: 'We really can't see. So let's, let's slow down.'"
Inflation is another big factor to watch in 2026 as it pertains to mortgage rates, and where it heads will not only impact what the Fed decides to do, but will trickle down to other parts of the market as well.
"Above all else, the main impact on mortgage rates in the next three to five years will be how well inflation continues to fall and how well we can manage employment," Nielsen says. "The rate market is mostly determined by the bond market, and bond investors are extremely sensitive to uncertainty around inflation, as the erosion of the dollar also erodes the bond they hold."
Inflation has risen steadily in recent months, up to 3% as of the most recent numbers. Again, though, future inflation reports may be delayed if the government shutdown continues. This makes predicting market trajectories even more challenging.
"Once inflation settles into a more predictable range, we'll gain a clearer view of where long-term rates are headed," says Michael Desimone, chief lending officer at Citadel Credit Union.
Consider locking a mortgage rate now before they rise again.
If you're looking at official forecasts, Fannie Mae projects the average 30-year mortgage rate will start off 2026 at 6.2% and then fall to 5.9% by year's end. The Mortgage Bankers Association predicts a steady 6.4% across the year.
Keep in mind: Both of these forecasts were released before the Fed's latest meeting (and rate cut), so predictions could shift by their next iterations.
"There is significant pressure from consumers for rates to drop, but my best guess is we see rates stubbornly bounce off a floor, hovering around 6% — albeit with some pockets of time slightly lower and slightly higher," Nielsen says. "I think a safe range to forecast is between 5.5 and 6.5%."
Charles Goodwin, vice president of bridge and DSCR lending at Kiavi, also predicts only small movements in mortgage rates next year.
"I don't see meaningful changes," Goodwin says. "I anticipate rates remaining generally range-bound, perhaps moving from the current level by only 25 to 50 basis points in either direction."
What could lead to a big drop (or rise) in mortgage rates?
For there to be a big drop in rates in the new year, there'd have to be a larger shift in economic conditions.
"We'd need a clear disinflation trend, weaker job data, and a more dovish Fed," says Debra Shultz, senior vice president of mortgage lending at Guaranteed Rate Affinity.
Much higher rates, on the other hand, could come about if inflation continues to rise consistently. In this case, the Fed may need to increase rates to slow the flow of money into the economy.
You could also see notably higher or lower rates as a result of the midterm elections, which take place in November of next year.
"The results will shape fiscal and regulatory policy for the following years," Desimone says. "Depending on the makeup of Congress, market sentiment and expectations around future federal spending or taxation could have short-term effects on the rate environment."
The bottom line
While it's impossible to predict where rates will head next, watching the Federal Reserve, monitoring jobs and inflation reports, and checking the 10-year Treasury yield — which generally mirrors 30-year mortgage rates, can help you get an idea.
And while many experts say rates could drop slightly in 2026, if that happens, it could cause a spike in homebuying demand, which could send home prices up, too. For this reason, if you can find a house in your price range now — at current interest rates — then you may be better off buying today than waiting for slightly lower rates down the line.
"You risk waiting for a small rate drop only to have it wiped out by a larger increase in home prices due to renewed demand," Goodwin says. "If you find the right house today and are comfortable with the payment, then you should buy, with the expectation to refinance if rates meet the lower end of your forecast."
Edited by Matt Richardson
