Where Mortgage Rates Could Be Headed in 2026

What Will Mortgage Rates Be Like in 2026?

As of mid-October 2025, the national average interest rate for a 30-year fixed-rate mortgage was 6.27%, according to Freddie Mac. While that's down from a 7.79% high in October 2023, it's still a far cry from the 5% range rates were in three years ago.

Moving into the new year, experts generally agree that mortgage rates will stay roughly the same. In other words, prospective homebuyers and homeowners looking to refinance may not get the relief they're hoping for.

Here are interest rate predictions from some of the mortgage industry's top experts:

It's important to note that these predictions are based on current economic data trends. As a result, they may change over time.

How Does the Fed Affect Mortgage Rates?

The Federal Reserve doesn't set mortgage rates directly, but its policies and market expectations strongly influence them. When the Fed raises or lowers the federal funds rate—the rate banks charge each other for overnight loans—it changes the cost of borrowing throughout the financial system.

Long-term mortgage rates respond to shifts in the Fed rate indirectly as it affects broader economic forces such as inflation, bond yields and investor sentiment. Mortgage rates most closely track the yield on the 10-year U.S. Treasury note.

When the Fed cuts rates, investors often expect slower economic growth or lower inflation, leading Treasury yields to fall. That drop usually pushes mortgage rates down as well.

How Mortgage Rates Could Impact the Housing Market

Because interest rates directly influence the cost of owning a home, they can have a significant impact on the housing market as a whole. Here are just a few ways.

High Rates Reduce Demand

High mortgage rates make homes less affordable, which discourages buyers and slows the housing market. This translates to fewer offers, softer competition and slower sales.

According to Redfin, the typical home under contract in July of this year sat on the market for 43 days, the longest span for the summer month in a decade. At the same time, housing inventory continues to remain below pre-pandemic levels, so sustained lower demand could allow inventory numbers to keep catching up.

Home Price Appreciation Has Been Curbed

As higher mortgage rates cool housing demand, it often shows up in slower home price gains. In July, home prices rose by 2.3% year over year, according to the Federal Housing Finance Agency (FHFA) House Price Index. Compare that to a 4.5% annual increase in July 2024 and a 4.6% clip in July 2023.

If rates hold steady near current levels, home prices are likely to continue growing slowly rather than surging again.

Millions Continue to Be Priced Out of the Market

About 1.8 million U.S. renter households can no longer afford the median-priced home in their market, driven by persistently high rates and climbing home prices, according to Coldwell Banker Richard Ellis (CBRE).

If rates hold steady in 2026, that affordability gap will likely persist. Renters who've been waiting for relief may need to stay put longer, especially as home prices remain relatively firm in many markets. Without meaningful shifts in interest rates, wages or housing supply, demand from first-time buyers could stay muted well into 2026.

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Are Mortgage Rates Already Decreasing?

After peaking for the year in January at 7.04%, mortgage rates have generally trended downward, albeit slowly and with a few bumps along the way.

One of the reasons for this is that the 10-year Treasury yield, which is widely used as a benchmark for mortgage rates, has remained above 4% in the face of stubborn inflation.

Analysts project the 10-year Treasury yield will stay around 4% through 2026. This outlook is driven by expectations that inflation will remain elevated, the Federal Reserve may delay aggressive rate cuts and fiscal pressures (like deficits and debt issuance) will keep term premiums elevated.

In that scenario, Treasury yields would resist downward pressure, limiting room for mortgage rates to fall significantly either.

Learn more: How Reduced Interest Rates Affect Mortgage Costs

Will Mortgage Rates Ever Go Down to 3% Again?

While it's possible that interest rates could return to 3% territory in the future, it's highly unlikely that it'll happen anytime soon. In fact, some experts say it won't happen again without another major economic shock like the one caused by the COVID-19 pandemic.

Learn more: How to Deal With High Mortgage Rates

Should You Wait for Lower Rates to Buy a House?

While elevated mortgage rates may cause some prospective homebuyers to pause, others may still be willing to take on higher costs for the benefits of homeownership. As you consider whether or not to wait for lower rates, here are some factors to keep in mind:

• Your budget: If you can comfortably afford a higher monthly payment without sacrificing other important financial needs and objectives, higher rates may not be as much of a concern for you. However, it may be better to wait if buying in today's market could create considerable financial stress.
• Your down payment: Many mortgage experts recommend a down payment of 20% to qualify for better terms (and to avoid private mortgage insurance if you're applying for a conventional loan). A higher down payment can also reduce your monthly housing payment because you're financing a lower amount. If you don't have much money to put down, it may be better to wait and build up your savings.
• Your credit score: The minimum credit score required to get most mortgage loans is 620, but the higher your score, the better your odds of qualifying for favorable terms. If your credit needs some work, you may be better off working on improving your credit before you buy.
• Other debts: If you have high-interest debt, such as credit card balances, adding a mortgage loan may make it more difficult to keep up with your debt obligations and savings goals—especially during a period of high mortgage rates. In this instance, it may be a good idea to work on eliminating expensive debt before buying a home.

Keep in mind that if you do choose to buy a home at a higher interest rate, you may have the opportunity to refinance the loan at a lower rate in the future to reduce your monthly payment.

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Learn more: Should I Buy a House When Rates Are High or Wait?

How to Get a Lower Mortgage Rate

While there's nothing you can do about the economic conditions that determine market rates, you can exert some control over your mortgage interest by qualifying for a better interest rate. Here are some steps you can take:

• Improve your credit. Register with Experian to get free access to your Experian credit report and FICO^® Score^Θ. Using these resources, you can pinpoint problem areas to address and build positive creditworthiness.
• Put more money down. The higher your down payment, the less of a risk you pose to the lender. As previously mentioned, a 20% down payment is the gold standard because it can also minimize your insurance costs on a conventional loan.
• Pay down debt. Your debt-to-income ratio (DTI) is another crucial factor lenders consider when determining your loan terms. If you can, consider paying down credit card balances and loans with small balances remaining. The lower your DTI, the greater capacity you'll have to pay your debts on time.
• Find a less expensive home. Lower loan amounts tend to be less risky to borrowers, so if you can find a home that suits your needs and costs less than your dream house, it could be financially prudent to opt for the less expensive option.
• Choose a shorter loan term. In general, 15-year mortgages charge lower interest rates than 30-year mortgages. But even with a lower rate, you can expect a higher payment on shorter-term loans. As a result, consider this option only if you can afford it.
• Buy down the rate. Many lenders allow you to effectively buy down your interest rate by buying what's called discount points—a form of prepaid interest. Each point typically costs 1% of your loan amount and reduces your interest rate by 0.25 percentage points.

The Bottom Line

Mortgage rates are expected to stay relatively flat through 2026—high enough to keep housing demand cool, but stable enough to offer predictability for borrowers. With limited relief on the horizon, affordability will likely remain a challenge, especially for first-time buyers.

Before applying for a mortgage, it's a good idea to check your free Experian credit report and FICO^® Score. Lenders use these to determine your eligibility and rate, and even a small credit improvement could save thousands over the life of your loan. You can check both for free with Experian.

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