Mortgage Interest Rate Predictions for 2026: What to Expect
Mortgage interest rates have been falling lately, hovering near their lowest levels in three years over recent weeks. While further declines would be welcomed by borrowers, the likelihood of those declines remains unclear.
On October 29, the Federal Reserve opted for its second consecutive rate cut, yet factors such as inflation and rising unemployment—both challenging to accurately measure amid the ongoing government shutdown—could threaten any further reductions. So, what does this mean for mortgage interest rates in 2026? Will they rise, or will the decline we’ve seen throughout much of 2025 continue?
We spoke with experts to find out what they are predicting for mortgage rates in the coming year. But first, start by seeing how low your current mortgage rate offers are here.
### How Are Mortgage Interest Rates Determined?
It’s important to note that the Federal Reserve doesn’t directly set mortgage rates, though these rates often move in the same direction as the Fed’s policies. For example, as markets anticipated potential rate cuts in September, the average 30-year mortgage rate fell to 6.13%. While rates rose slightly in October, they remained within the low 6% range.
However, future rate cuts are uncertain, which could introduce volatility into the mortgage rate market.
Mike Nielsen, Sales Manager at Churchil Mortgage Corporation, explains, “The Fed is in a tough position right now, weighing 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.”
Fed Chairman Jerome Powell acknowledged this uncertainty following the October meeting: “What do you do if you’re driving in the fog? You slow down. There’s a possibility that it would make sense to be more cautious. I’m not committing to that, but it’s certainly a possibility that you would say: ‘We really can’t see. So let’s slow down.’”
### Inflation’s Impact on Mortgage Rates in 2026
Inflation remains a significant factor influencing mortgage rates. Its trajectory will affect not only the Fed’s decisions but also broader market reactions.
Nielsen adds, “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. 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, reaching 3% as of the most recent reports. Yet, due to the government shutdown, future inflation data releases may be delayed, making it even more challenging to forecast market trends.
Michael Desimone, Chief Lending Officer at Citadel Credit Union, states, “Once inflation settles into a more predictable range, we’ll gain a clearer view of where long-term rates are headed.”
### Forecasts for Mortgage Rates in 2026
If you’re considering locking in a mortgage rate, official forecasts offer useful guidance:
– **Fannie Mae** projects the average 30-year mortgage rate will start 2026 at 6.2% and fall to 5.9% by year’s end.
– The **Mortgage Bankers Association** predicts a steady rate of approximately 6.4% throughout the year.
Keep in mind, these forecasts were released before the Fed’s latest meeting (and rate cut), so predictions may shift in future updates.
Nielsen offers a practical outlook: “There is significant pressure from consumers for rates to drop, but my best guess is we’ll see rates stubbornly bounce off a floor, hovering around 6%, with some pockets of time slightly lower or higher. 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, agrees, saying, “I don’t see meaningful changes. I anticipate rates remaining generally range-bound, moving from the current level by only 25 to 50 basis points in either direction.”
### What Could Cause a Big Drop or Rise in Mortgage Rates?
Significant changes in mortgage rates in 2026 will depend on broader economic shifts.
For a notable drop in rates, a combination of factors is necessary: a clear disinflation trend, weaker job data, and a more dovish Fed stance. Debra Shultz, Senior Vice President of Mortgage Lending at Guaranteed Rate Affinity, explains, “We’d need a clear disinflation trend, weaker job data, and a more dovish Fed.”
Conversely, rates could rise sharply if inflation continues to climb steadily, potentially forcing the Fed to raise rates to slow the economy.
Political events like the November midterm elections could also impact mortgage rates. Desimone notes, “The results will shape fiscal and regulatory policy for the following years. 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: Should You Lock Your Rate Now?
Predicting exact mortgage rate movements is difficult, but staying informed by watching Federal Reserve announcements, jobs and inflation reports, and the 10-year Treasury yield (which generally mirrors 30-year mortgage rates) can help guide your decisions.
Many experts suggest rates could drop slightly in 2026. However, if rates do fall, increased homebuying demand could drive home prices higher as well.
For this reason, if you find a house within your price range at current interest rates, you may be better off buying now rather than waiting for marginally lower rates.
Goodwin advises, “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. 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.”
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Stay updated with the latest mortgage rate offers and forecasts to make the most informed decision for your home purchase in 2026.
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