Will Mortgage Rates Go Down in 2026? Here's What Housing Experts Predict

Mortgage rates have fallen in recent months, sparking excitement among would-be homebuyers frustrated by the high cost of a home loan. But any hopes for even lower rates in the new year are likely to be dashed.

Housing experts expect mortgage rates to remain close to their current average in 2026. Redfin and Realtor.com both predict rates to average around 6.3% in 2026, while Bright MLS forecasts an average of 6.15% by year-end. These predictions place mortgage rates not much lower than their current average of 6.22% — a significant improvement over the 2022 peak rate of 7.04% but still well above the pandemic lows of 3% or less.

Although rates may stay above 6% in the new year, buyers can still snag some relief from the high borrowing costs. According to Odeta Kushi, deputy chief economist at title insurance and settlement services provider First American Finance Corporation, additional improvements in affordability will come from elsewhere.

"We might see some gradual decline next year, but nothing dramatic," Kushi says. "Income growth is outpacing house price growth, which is allowing affordability to improve."

With higher wages and slower price growth expected in 2026, those monthly mortgage payments will (likely) be easier to budget for.

What's keeping mortgage rates high?

The two main factors currently influencing mortgage rates are pulling in opposite directions, according to Daryl Fairweather, Redfin's chief economist.

The first is inflation, which reached a 40-year high of 9% in 2022, prompting the Federal Reserve to take action to bring prices down. It did so by repeatedly raising the federal funds rate — the short-term interest rate banks charge each other for overnight loans. The central bank aimed to slow consumer demand enough to lower prices for goods and services.

A side effect of that policy was that mortgage rates surged as lenders passed on the increased costs to borrowers. Buyers are still dealing with the fallout; inflation remains high, and mortgage rates have been slow to come down.

The second factor is the labor market, which has shown signs of weakening this year. When the economy and employment slow, the Fed typically cuts the federal funds rate to ease borrowing conditions and spur growth. As borrowing costs between banks decrease, so do mortgage rates.

Although inflation has cooled significantly from its 2022 peak, it remains above the Fed's 2% long-run target range, exerting upward pressure on mortgage rates. Concerns over a potential slowdown in job growth, meanwhile, are exerting downward pressure on rates, producing a stalemate that is keeping rates stable.

Until inflation drops or the labor market breaks, Fairweather says, "we're going to be stuck where we are when it comes to mortgage rates."

What could bring mortgage rates down?

Although most forecasts call for mortgage rates to remain fairly steady in 2026, several factors could push those rates below 6%.

So far, the economy has been resilient against a significant financial downturn, but there are potential dangers. Earlier fears of a recession caused by newly imposed tariffs and the prospect of slowing economic growth have faded — but not completely disappeared. Any significant economic shock, such as a credit bubble bursting, a big downturn in consumer spending or a large increase in unemployment, could cause a recession and lead mortgage rates to tumble.

Another major factor that could push mortgage rates lower is if inflation falls to the Federal Reserve's desired 2% range. With consumer prices under control, the Fed would likely respond by reducing the federal funds rate to a neutral level that neither slows nor spurs economic activity.

If such were the case, mortgage rates could fall to the low 6% or high 5% range, says Danielle Hale, chief economist at Realtor.com.

Overall, 2026 is shaping up to be a mild improvement over 2025. Assuming all goes as expected, buyers will gain slightly more purchasing power due to lower mortgage rates, and sellers won't see a significant decline in home prices.

"It's a small improvement, but at this point, any improvement helps," Hale says. "It's going to be a market that leaves both buyers and sellers a little bit happier."

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