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Quick Answer
Mortgage rates are expected to gradually decline in 2026 as inflation cools and the Federal Reserve considers rate cuts. However, the pace and extent of these drops will depend on broader economic conditions, including labor market trends and potential recession risks. After two years of interest rate hikes and market uncertainty, homebuyers and homeowners alike are asking one key question: Will mortgage rates drop further in 2026? If you're planning to buy a home, refinance, or simply monitor the housing market, understanding what the experts predict for next year can help you time your move and potentially save thousands over the life of your loan. Let’s explore what’s driving today’s mortgage rates, what could happen in 2026, and how to prepare no matter what the market brings.
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Where mortgage rates stand now
As of late 2025, mortgage rates have begun to ease after peaking in the mid-7% range earlier this year. The average 30-year fixed-rate mortgage has dipped into the high-6% range, while adjustable-rate mortgages (ARMs) are offering introductory rates in the low-to-mid 5% range.
What the rates are attributed to:
- Cooling inflation rates
- The Federal Reserve is signaling a pause or a gradual shift away from aggressive rate hikes
- Slower job growth and signs of economic deceleration
- Easing pressure in the bond markets, which heavily influence mortgage-backed securities
What influences mortgage rates?
Mortgage rates aren’t set directly by the Federal Reserve, but they are heavily influenced by Fed actions and expectations. Here are the biggest factors shaping mortgage trends:
- Federal Funds Rate: Impacts short-term borrowing and market sentiment
- Inflation trends: Higher inflation typically drives rates up, while easing inflation can lead to lower rates
- Bond yields: Mortgage rates tend to follow the 10-year
- Treasury yield Economic growth or slowdown: Recession fears often push rates lower
- Global events: Geopolitical uncertainty and foreign investment trends can also affect U.S. mortgage rates
Expert predictions for 2026 mortgage rates
Economists and housing analysts are cautiously optimistic about 2026. While no forecast is certain, several key institutions have released their outlooks for the coming year.
Freddie Mac:
- Projects average 30-year fixed rates to settle below 6% in 2026
- Expects increased affordability and modest growth in home sales
Mortgage Bankers Association (MBA):
- Predicted rates could fall to around 6.4% by late 2026 if inflation remains on target
- Suggests refinancing volume will grow if rates stay below 6%
Fannie Mae:
- Anticipates gradual downward pressure on rates throughout 2026
- Warns that volatility is still possible due to shifting economic indicators
National Association of Realtors (NAR):
- Forecasts mortgage rates will stabilize near 6%, helping inventory move and boosting buyer confidence
Why rates may fall in 2026
The conditions are aligning for a possible rate easing. Here’s why:
- Inflation has slowed significantly, approaching the Fed’s 2% target
- The labor market is cooling, reducing pressure on wages and prices
- Consumer spending has declined, signaling slower economic growth
- The Fed is expected to cut rates in mid-to-late 2026 if current trends continue
These factors could lead to more favorable borrowing conditions for homebuyers and refinancers alike.
But don’t expect dramatic drops
While many hope for a return to the ultra-low rates of 2020 and 2021, most experts agree that rates are unlikely to fall below 5% in the near future. The Federal Reserve remains cautious, and mortgage lenders are balancing risk with demand. Remember:
- The days of 3% mortgage rates were tied to emergency pandemic-era policies
- A more normalized range of 5% to 6% is historically typical and sustainable
- Even small rate drops can significantly impact affordability and monthly payments
Should you wait until 2026 to buy a home?
Waiting might save you money on interest—but only if home prices stay steady and rates actually fall as predicted. Consider these factors:
When it might make sense to wait:
- You’re not in a hurry to move
- You expect your income or credit to improve
- You want to save more for a down payment
- You’re confident that home prices in your area won’t rise significantly
When it makes sense to buy now:
- You find the right home in your price range
- You’re concerned about rising home values
- You plan to refinance later if rates drop
- You want to lock in today’s pricing before competition picks up again
Refinancing opportunities in 2026
If you locked in a mortgage at 6.5% or higher in the past two years, 2026 could be your window to refinance. A drop of even 0.5% in your interest rate can lower your monthly payment and reduce the total interest you pay over time.
Tips for timing your refinance:
- Monitor Fed announcements and inflation data
- Work on improving your credit score to qualify for the lowest available rates
- Watch for no-closing-cost refinance promotions or MIDFLORIDA Credit Union’s rate watch alerts
- Use MIDFLORIDA’s refinance calculator to estimate your break-even point
Plan ahead with MIDFLORIDA
Whether you’re buying your first home, upgrading, or refinancing, it’s smart to stay ahead of the market. At MIDFLORIDA, we help members prepare for what’s next with:
- Personalized rate guidance based on economic trends
- Fixed and adjustable-rate mortgage options
- Flexible refinancing solutions
- Local underwriting for faster approvals
- Tools to monitor and time your rate lock
If mortgage rates fall in 2026, you’ll be ready. And if they don’t, you’ll still have experienced support and financing options that work for you. Start your application with MIDFLORIDA
Frequently asked questions: Mortgage rate forecast 2026
Q: Are mortgage rates expected to fall in 2026?
A: Most forecasts suggest rates will gradually decline in 2026, with averages possibly landing between 5.5% and 6%, depending on inflation and Federal Reserve policy.
Q: Will mortgage rates ever go below 5% again?
A: It’s possible, but unlikely in the short term. Ultra-low rates were driven by emergency conditions in 2020–2021. Most economists expect 5%–6% to be the new normal.
Q: Is now a good time to refinance, or should I wait?
A: If your current mortgage rate is significantly higher, it may still make sense to refinance now—especially if you plan to stay in your home long term. But if rates drop further in 2026, that could offer additional savings.
Q: How does the Federal Reserve influence mortgage rates?
A: While the Fed doesn’t set mortgage rates directly, its policies shape market expectations. Rate hikes or cuts influence bond yields, which in turn affect mortgage rates.
Q: What type of mortgage is better if rates are falling—fixed or adjustable?
A: In a falling-rate environment, adjustable-rate mortgages can offer lower initial costs, but a fixed-rate mortgage provides long-term stability. The best choice depends on your goals, how long you plan to stay in the home, and your risk tolerance.
