Will Mortgage Rates Go Down in 2026?

If you're stressed about mortgage rates, you're not alone. Maybe you've been waiting on the sidelines, hoping rates will drop enough to finally make buying a home feel possible. Or maybe you're stuck with a 7% rate from last year and wondering if relief is coming.

Here's the honest answer: Yes, rates should come down a bit in 2026. But we're not going back to 3% mortgages. The most likely scenario is rates bouncing around the 6% mark all year, maybe dipping into the high 5s if we're lucky.

Here's what the experts are actually saying and, more importantly, what it means for you.

Table of Contents

• Where Rates Are Right Now
• What the Experts Are Predicting
• Why Rates Aren't Dropping Faster
• The "Golden Handcuffs" Problem
• So What Should You Actually Do?
  • If You're Trying to Buy a Home
  • If You're Thinking About Refinancing
• What to Expect Quarter by Quarter
• What This Means for You

Where Rates Are Right Now

As of mid-January 2026, the 30-year fixed mortgage rate is sitting around 6% to 6.2%, depending on which survey you look at. That's a solid improvement from a year ago when rates were above 7%.

To put that in perspective: if you're buying a $400,000 home with 20% down, the difference between a 7% rate and a 6% rate saves you about $200 a month. That's real money.

The bad news? Rates are still way higher than the 2.5% to 3% deals people locked in during 2020 and 2021. And that gap is creating a weird situation in the housing market (more on that below).

What the Experts Are Predicting

Forecasts from over a dozen major institutions paint a consistent picture. Here's what they're saying, without all the jargon:

The consensus view: Rates will stay between 6% and 6.5% for most of 2026. You might see brief dips below 6%, but don't count on rates staying there.

Fannie Mae thinks rates will end 2026 around 5.9%. The Mortgage Bankers Association is more pessimistic, expecting rates to stay at 6.4% all year. Redfin splits the difference at 6.3%.

The most optimistic forecast comes from Morgan Stanley, who thinks rates could briefly touch 5.5% to 5.75% by mid-year. But even they expect rates to bounce back up after that.

Bankrate's Ted Rossman put it well: rates should "bounce around 6%, sometimes a little lower, sometimes a little higher, throughout much of 2026."

What about getting back to 5% or lower? Don't hold your breath. Almost every major forecast says sub-5% rates are extremely unlikely unless we hit a serious recession. And nobody wants rates to drop that way.

Why Rates Aren't Dropping Faster

You might be wondering: if inflation is cooling down and the Fed has been cutting rates, why aren't mortgage rates falling more?

Here's the thing most people don't realize: mortgage rates don't follow the Fed's rate directly. They follow the 10-year Treasury yield, which is driven by what investors think will happen with inflation and the economy over the next decade.

Right now, a few things are keeping that Treasury yield (and therefore mortgage rates) stubbornly high:

Inflation isn't quite dead yet. It's come down a lot, but we're still running around 2.5% to 2.7%, which is above the Fed's 2% target.

Tariffs are a wild card. According to the Yale Budget Lab, the average American household will pay $1,300 to $1,700 more this year because of tariffs. That's putting upward pressure on prices. On the flip side, if tariffs slow down the economy, that could actually push rates lower.

The Fed is being cautious. They've cut rates significantly since late 2024, but their latest projections suggest only one more small cut in 2026. Goldman Sachs thinks we might get two cuts, and KPMG is hoping for three. But nobody's expecting aggressive cuts.

The "Golden Handcuffs" Problem

Here's something that's really affecting the housing market right now: millions of homeowners locked in rates below 4% during the pandemic, and they're not selling.

Can you blame them? If you've got a 3% mortgage, taking on a 6% rate feels like a massive step backward. Research from the Federal Housing Finance Agency found that for every percentage point of rate difference, homeowners are 18% less likely to sell.

This "lock-in effect" has kept housing inventory tight, which props up home prices even when buyer demand softens.

The good news? This is slowly changing. There are now more Americans with rates above 6% than below 3%, according to Reventure. As more people move for jobs, have life changes, or simply get tired of waiting, inventory should gradually improve.

So What Should You Actually Do?

If You're Trying to Buy a Home

Here's the honest take: waiting for significantly lower rates is probably not going to pay off.

The difference between today's rates and the best-case scenario for year-end is maybe 0.3 to 0.4 percentage points. On a $320,000 loan, that's roughly $70 a month. Not nothing, but probably not worth putting your life on hold.

Meanwhile, home prices are expected to keep rising, just at a slower pace of 1% to 4% this year. And you can always refinance later if rates do drop meaningfully.

The real question isn't "will rates go down?" It's "can I afford the monthly payment right now?" If the answer is yes, and you've found a home you love, waiting for a slightly better rate might cost you the house.

If You're Thinking About Refinancing

Refinancing only makes sense if you'll save enough each month to cover the closing costs before you move again. This is called your "break-even point."

Here's a simple way to figure it out: Take your closing costs and divide by your monthly savings. If refinancing costs you $6,000 and saves you $200 a month, you'll break even in 30 months. If you're planning to stay at least that long, it could be worth it.

According to Kiplinger, most people need rates to drop about 0.75% from their current rate to make refinancing worthwhile within three years.

If you're sitting on a rate above 7%, the current rates in the low 6s might already make refinancing attractive. If you're already in the low 6s, the forecasts suggest you'd be waiting a while for enough improvement to justify the costs.

One option to consider: a no-closing-cost refinance, where you accept a slightly higher rate in exchange for the lender covering your fees. The math works differently and might make sense even with smaller rate drops.

What to Expect Quarter by Quarter

What This Means for You

Yes, mortgage rates will probably come down a bit in 2026. But we're talking about modest declines, not the dramatic drops some people are hoping for. Plan for rates to hover around 6%, with some ups and downs along the way.

If you can afford a home at today's rates, don't let the hope of slightly lower rates keep you from living your life. Buy when you're ready, and refinance later if rates drop enough to make it worthwhile.

And if you're stuck waiting, take some comfort in this: rates are already almost a full percentage point lower than they were a year ago. The market is slowly getting better. It's just not happening as fast as anyone would like.

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Sources: Freddie Mac, Fannie Mae, Mortgage Bankers Association, Morgan Stanley, Goldman Sachs, Redfin, Bankrate, NAR, and others. Last updated January 2026.