By Ben Luthi
Edited by Samuel MountjoyWhen Will Mortgage Rates Go Down?
Quick Answer
Mortgage rates hinge on unpredictable factors, but forecasts suggest they’ll remain above 6% through the rest of 2025, with only modest declines expected in 2026.
Mortgage rates depend on several moving factors, many of which are hard to predict exactly. Current forecasts suggest 30-year fixed mortgage rates will likely stay above 6% through 2025, with gradual declines expected in 2026.
While rates have dropped from their recent highs, homebuyers shouldn't expect a return to the ultra-low rates seen in 2020 and 2021 anytime soon. Here's what you need to know.
When Will Mortgage Rates Go Down?
Mortgage rates are expected to end 2025 at around 6.4%, according to a Fannie Mae forecast from September. That's slightly higher than the current average 30-year fixed mortgage rate of 6.3%, based on Freddie Mac data from September 25.
By the end of 2026, Fannie Mae predicts that interest rates will be down, but not by much. The government-sponsored enterprise's September 2025 forecast anticipates that the average rate will decline to approximately 5.9% by the end of 2026.
But forecasts are just that. Mortgage rate predictions can be tough to rely on because they depend on countless variables, from Federal Reserve policy decisions to global economic shifts.
Right now, economic inflation, tariffs, an unstable job market and broader uncertainty about economic growth all add volatility. Even small changes in these factors can significantly alter the trajectory of mortgage rates, making any long-term outlook more of an educated guess than a guarantee.
That said, there's one thing many experts agree on: Barring another major economic crisis like what occurred during the COVID-19 pandemic, we won't see mortgage rates in the 2% to 3% range again in our lifetimes.
Learn more: Current Mortgage Rates: What Will You Pay?
What Determines Mortgage Rates?
There are multiple factors that influence the direction that mortgage rates take, making predictions challenging. Here are a handful of examples:
- Federal Reserve policy: The Federal Reserve doesn't directly set mortgage rates, but its decisions on the federal funds rate have an indirect influence on mortgage costs. When the Fed cuts rates to stimulate the economy, mortgage rates often follow—though not always immediately.
- 10-year Treasury yields: Fixed-rate mortgages typically follow the 10-year Treasury yield rather than the federal funds rate, since both are long-term financial instruments. When investors buy and sell bonds based on economic expectations, mortgage rates can move accordingly.
- Inflation: Economic inflation is a major influence on both mortgage rates and Federal Reserve policy. When inflation rises, lenders demand higher rates to protect against losing purchasing power over time.
- Employment and economic data: Weak employment data can encourage Fed rate cuts, potentially resulting in lower mortgage rates.
- Global economic events: International trade policies, geopolitical tensions and global economic uncertainty can all influence U.S. bond markets and mortgage rates.
Learn more: Factors That Help Determine Your Mortgage Interest Rate
Is Now a Good Time to Buy a House?
The current rate environment presents both challenges and opportunities for homebuyers. While rates remain elevated compared to pandemic-era lows, they've dropped from recent highs and may continue declining gradually.
The current interest rate environment presents both challenges and opportunities for homebuyers. Here's what to consider before moving forward.
Pros of Buying Now
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Rates are at their lowest levels in nearly a year. Mortgage rates have fallen from their peaks in 2023 and early 2024. Locking in a rate around 6.3% means capturing relatively favorable terms in today's market.
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You avoid the risk of rates rising again. Interest rates can be unpredictable, and waiting could mean missing current opportunities. If economic conditions change, rates could climb back up before declining again.
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Future refinancing opportunities may be available. If rates drop significantly later, you may be able to refinance to a lower rate. This gives you the chance to benefit from both homeownership now and potentially lower payments later.
Cons of Buying Now
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Home prices remain elevated. The median home sale price was $410,800 in the second quarter of 2025, up from $317,100 in 2020, according to the Federal Reserve Bank of St. Louis. With rates still relatively high, the total cost of homeownership has increased substantially.
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Monthly payments are still high. Despite recent rate declines, monthly mortgage payments remain elevated compared to recent years. A $400,000 loan at today's rates costs nearly $865 more per month than it would have at the record low of 2.65% in January 2021.
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Competition increases as rates drop. When mortgage rates fall, more buyers typically enter the market, potentially driving prices higher. This creates a double-edged sword where lower rates may be offset by increased home prices.
What to Consider
When evaluating whether to buy now, focus on factors within your control rather than trying to time the market perfectly, which can be a fool's errand. Consider your down payment size, credit score and debt-to-income ratio, as these elements significantly impact the rate you'll receive regardless of broader market conditions.
Avoid pinning your homebuying hopes on short-term events and day-to-day rate fluctuations that are impossible to accurately predict. Instead, evaluate your long-term housing needs, financial stability and whether you can comfortably afford the monthly payments at current mortgage rates.
If you're financially ready and find a home that meets your needs, the "perfect" rate may never come, and waiting could cost you more through rising home prices and increased competition.
Should I Refinance My Mortgage?
The decision to refinance depends on your current rate and financial situation as well as the new rate you expect to receive. While most homeowners currently have rates lower than today's market offers, some borrowers could still benefit from refinancing.
Pros of Refinancing Now
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You could secure a better interest rate. Recent homebuyers who borrowed when mortgage rates were high in 2022 and 2023 may find current refinancing rates appealing. Even a modest rate reduction can lead to significant monthly savings over the life of your loan.
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You can switch to a shorter term. Refinancing to a 15-year mortgage from a 30-year loan can help you build equity faster and save thousands in total interest. Despite higher monthly payments, the long-term savings can be substantial.
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You could access your home equity. Cash-out refinancing allows you to tap into your home's increased value for renovations, debt consolidation or other major expenses. This can be especially valuable if your home has appreciated significantly since your original purchase.
Cons of Refinancing Now
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Your current rate may be better. More than 81% of homeowners have an interest rate under 6%, according to National Association of Realtors data, which is below the current market average. If you secured a rate during the pandemic era, refinancing would likely increase your monthly payments.
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Closing costs can be substantial. Refinancing typically costs 2% to 6% of your loan amount in fees and closing costs. These upfront expenses can take years to recoup through monthly savings, especially if rate differences are minimal.
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Rate volatility could work against you. If you refinance now and rates drop significantly later, you might miss out on even better savings opportunities.
What to Consider
When evaluating refinancing, focus on your break-even point: how long it takes for monthly savings to offset closing costs. A common rule of thumb suggests refinancing when you can reduce your rate by at least 1 percentage point, but this depends on how long you plan to stay in your home and your specific financial situation.
Many recent homebuyers may wait for rates to drop significantly before refinancing, though experts caution this may take longer than expected. However, if your financial goals have changed or you need to access equity, refinancing might make sense even without dramatic rate improvements.
As mortgage rates decline gradually in the near future, more refinancing opportunities are expected to emerge for borrowers currently waiting on the sidelines.
Learn more: Compare Current Mortgage Refinance Rates
Plan for Reality, Not Perfect Timing
While mortgage rate forecasts suggest gradual declines ahead, the path won't be linear or predictable. Many forecasts predict mortgage rates will decrease gradually through 2025, though this decline may be slow, with short-term rate increases possible.
Rather than trying to time the market perfectly, focus on factors within your control. Improve your credit score, save for a larger down payment and shop around with multiple lenders to secure the best available rate.
If you're ready to explore your mortgage options, start by getting free access to your Experian credit report and FICO® ScoreΘ. These resources can help you understand where you stand financially and identify any areas for improvement before applying for a loan.
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About the author
Ben Luthi
Ben Luthi has worked in financial planning, banking and auto finance, and writes about all aspects of money. His work has appeared in Time, Success, USA Today, Credit Karma, NerdWallet, Wirecutter and more.
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