If you’re planning to purchase or refinance a home, you’re undoubtedly keeping a close eye on mortgage interest rates. Fortunately, the benchmark 30-year fixed mortgage rate averaged lower across 2025, improving home affordability. But will mortgage rates fall in 2026?
Read on for mortgage rate forecasts from different experts, and take the time to learn what lower rates could mean for your buying power, if it pays to refinance when rates drop, and if you should postpone your plans to buy or refi this year.
Why mortgage rates don’t fall immediately after Fed cuts
Last year, the Federal Reserve made three rate cuts of 25 basis points each, occurring in September, October, and December. These cuts resulted in a total reduction of 75 basis points, bringing the target range down to 3.50 to 3.75% by the end of 2026. This number refers to the Fed’s short-term benchmark rate—not mortgage rates, which are set separately and are still closer to 6% for most buyers today.
Truth is, however, that mortgage rates don’t automatically fall when the Fed slashes rates. That’s because the Federal Reserve doesn’t set mortgage rates.
“The Fed cuts the rate that banks can borrow money at. But mortgage rates are traditionally controlled by what the investor market, or street, is willing to pay for mortgage-backed securities. These are represented in bonds based on Fannie Mae, Freddie Mac, and Ginnie Mae loans,” explains Ralph DiBugnara, president of Home Qualified.
Mortgage rates are influenced primarily by two factors: the 10-year Treasury yield, and a spread. The 10-year Treasury yield acts as a baseline for long-term borrowing costs. From there, mortgage pricing adds a built-in premium (the spread) to cover additional costs and risks. Mortgage rates only tend to decrease if the 10-year Treasury yield falls and the mortgage spread does not widen enough to offset it.
“Think of the Fed as the quarterback of the football team calling plays for the next drive: It controls the short-term interest rate that influences what banks charge each other overnight,” says Albert Lord, founder/CEO of Lexerd Capital Management. “Mortgage rates, on the other hand, are more like the sports book line for the whole game. They reflect the market’s best guess about what’s likely to happen over many quarters – not just what play the quarterback calls at the moment.”
Or, envision mortgage rates as a price tag set by investors instead of a decree from the Fed. Although the Fed controls short-term interest rates, mortgage loans are long-term bets. Investors choose what rate to charge depending on the 10-year Treasury bond and how much they worry about inflation, which erodes their profits over time. Consequently, mortgage rates tend to move even before the Fed makes an announcement, fluctuating daily based on new data about things like employment and the cost of living.
Mortgage rate forecasts for 2026
While no one can precisely predict what mortgage rates will average this year, or when they will rise or fall, it’s helpful to look at forecasts issued by trusted institutions and organizations. Here’s a roundup of rate predictions recently published:
| Organization | Projected 30-Year Fixed Rate Avg (2026) |
|---|---|
| Fannie Mae | 6.0% |
| Mortgage Bankers Association | 6.4% |
| National Association of Homebuilders | 6.17% |
| Redfin | 6.3% |
Consider that the benchmark mortgage rate average dropped from a high of 7.04% a year ago to 6.15% by New Year’s Eve, and hovers just above 6% at the time of this writing, according to the Federal Reserve Bank of St. Louis.
In a real estate market where housing prices continue to rise and buying power is challenged, even modest rate drops matter.
What other experts predict
Published prognostications with raw numbers can be helpful if you are on the fence about whether or not to purchase or refinance a property. But it can be even more constructive to learn the insights and detailed projections from respected voices in the industry. We reached out to several, asking for their rate predictions this year.
“Mortgage rates are anticipated to remain volatile and above 6% through 2026,” says Dr. Selma Hepp, chief economist at Cotality. “Most forecasts expect rates to fluctuate between 5.8% and 6.4% throughout 2026. Continued gradual decline in mortgage rates is still the predominant view, which should provide buyers with modest payment relief compared to 2024 and 2025. Also, declines will stimulate more refinancing activity – particularly among those who bought in the last couple of years.”
Dennis Shirshikov, a professor of finance and economics at City University of New York/Queens College, envisions the 30-year fixed-rate mortgage to edge modestly lower this year.
“I foresee an average of about 6.25% by midyear but down to as low as 5.75% at year’s end – with the path depending on whether inflation continues to cool and/or growth slows without a shock to the economy,” he says.
Realtor Bruce Ailion is even more optimistic about cheaper financing. He expects mortgage rates to decline 0.5% to 0.75% across 2026.
“One reason for the lower rates will be that the spread between the 10-year Treasury bond and the 30-year mortgage rate has been higher than its historic average,” continues Ailion. “Even if short-term and 10-year bond prices don’t decline, a normalization in the yield spread should bring mortgage rates down.”
Ask Lord and he’ll tell you that he anticipates a rate range between 5.9% to 6.3% by midyear, and 5.7% to 6.1% by the end of 2026.
“I believe the most likely path is a slow cooling process for the market rather than a dramatic shift that would come with a major economic event like a recession or a new inflation surge,” he adds. “If inflation persists or even increases, or other financial conditions loosen too much, the Fed may decide to pause rate cuts longer than markets hope. Because of that uncertainty, I expect only a little downward movement in mortgage rates this year.”
DiBugnara also wouldn’t be surprised if rates clocked in below 6% this year.
“Based on some of the recent commentary by the current administration and a change coming in the Fed hierarchy, I believe we will see a slow but consistent drop in mortgage rates, averaging somewhere around 5.875% in 2026,” he notes.
What lower mortgage rates could mean for your buying power
Buying power is just another way of understanding the maximum home price you can afford based on your income, debts, down payment, and the monthly payment amount a lender would approve you for.
“It’s really more of a payment and qualification concept than a sticker price concept,” says Shirshikov. “With rates falling lately, the same-sized mortgage creates a smaller monthly principal and interest payment, helping you qualify to purchase more house under debt-to-income ratio rules or making you a more qualified borrower to begin with.”
To illustrate buying power, let’s say you’re pursuing a $400,000 30-year fixed mortgage loan at 7.0%. That means the principal and interest payment would be approximately $2,661 per month. But if you locked in a 6.0% fixed rate instead, your monthly payment would decrease to $2,398 – saving you around $263 every month.¹
“For every quarter of a percent that interest rates drop, you can save between $15 to $20 per month for every $100,000 borrowed,” says DiBugnara.
Could 2026 trigger a refinancing wave?
But what if you’re not seeking to purchase a home: Instead, you want to reset the mortgage you already have? Is 2026 shaping up to be a favorable year for refinancing?
“There is a significant share of current homeowners who bought or refinanced their homes in 2020 and 2021. These homeowners are sitting on interest rates that are significantly below current rates. That’s why refinancing activity in 2026 is more likely to be concentrated among borrowers who recently took out loans at higher rates and among households refinancing for cash flow reasons,” Lord says.
A broad refi wave this year is possible, but it would depend on how far rates fall relative to the large cohort of homeowners who locked in rates earlier this decade (consider that the 30-year fixed-rate mortgage hit a record low of 2.65% around this time five years ago).
“If the 30-year mortgage remains in the mid-5% to mid 6% range for most of 2026, refinancing activity will likely be selective rather than universal,” Shirshikov says. “It would be concentrated among borrowers with rates well above 6%, borrowers with FHA or VA streamline options, and borrowers refinancing for credit improvement or term changes rather than those purely chasing lower rates.”
Should you wait to buy or refinance?
Putting your purchase dreams on hold makes sense if your budget is tight and a lower rate would be the difference between qualifying and not qualifying for financing, or if you need more time to save up for the down payment and recommended emergency funds, per Lord.
“Trying to time when rates will hit bottom is risky. If mortgage rates come down, remember that demand can rise, and home prices can increase, which can offset some of the benefits. For many households, the better question is whether the monthly payment works comfortably today and whether the home you seek fits a long-term plan,” he explains.
Shirshikov believes waiting is only rational if the benefit of a potentially lower rate is likely to exceed the cost of delaying matters.
“For many households, the hidden cost of postponing a purchase is time, uncertainty, and the possibility of higher home prices or tighter inventory,” he says. “Acting now can make sense when a purchase is driven by life timing, stable income, and a home that works at today’s payment. You can always refinance later if rates fall, but you cannot get back the months you did not build equity or lock in a property that fits your needs.”
When it comes to refinancing, “a general rule of thumb is that your new interest rate should be one percentage point or more below your current rate for it to make economic sense,” says Ailion.
But pulling the trigger on a refi sooner versus later can pay off if you are already seeing meaningful monthly savings and you plan to keep the loan long enough to recoup closing costs.
“I would focus less on predicting mortgage rates and more on having a refinance trigger point: Decide the rate and payment you would lock in if it becomes available, then act quickly when the market hits it,” Lord advises.
How Better helps you prepare – no matter where rates go
Trying to time the market perfectly is tough. What matters more is understanding how today’s rates fit your financial picture and goals. That’s where working with an experienced loan officer can make a real difference.
At Better, loan officers take a close look at your income, credit profile, equity, and long-term plans—whether that’s buying soon, refinancing, or waiting for a better opportunity. Instead of guessing, they help you model different scenarios and decide when it actually makes sense to move forward, and when it doesn’t.
If you’re curious what your options look like right now, you don’t need to book an appointment or even get on the phone. With Better’s pre-approval, you can see personalized rates and loan options based on your real financial details—so you can plan with clarity, not predictions.
...in as little as 3 minutes – no credit impact
Mortgage rate outlook FAQs
Will mortgage rates definitely fall in 2026?
Although many trusted industry experts and organizations expect that rates could slightly drop or remain in the current 6% range across 2026, no person or institution can predict with 100% accuracy where rates will land. There is no certainty that mortgage rates will decrease this year: They could rise or fall, depending on market conditions and other economic factors.
How much do rates need to drop for refinancing to make sense?
Refinancing makes sense when the total savings over your expected time in the home clearly exceeds the total cost of the refinance (also called your breakeven point), and when the refinance improves your risk profile – not just your rate. A common rule of thumb is that rates should drop at least 1 percentage point to justify a traditional rate and term refinance for many borrowers. But the right time for you to refinance depends on many factors, including your loan size, closing costs, how long you will keep the mortgage, and whether you can avoid resetting the clock in a way that increases total interest paid.
Want to know how much you could save by refinancing? Use Better Mortgage’s refi calculator to compare the cost of your current mortgage and a new one. Just enter your current loan details, then choose a new rate and loan type from the Better Mortgage rate tool to get started. If you like what you see, get pre-approved in as little as 3 minutes without affecting your credit score.
...in as little as 3 minutes – no credit impact
Do Fed cuts automatically lower mortgage rates?
No, rate cuts by the Federal Reserve do not automatically lower mortgage rates. Instead, mortgage rates primarily track 10-year Treasury yields; as the yield on government debt moves, mortgage costs usually follow. They are also shaped by inflation expectations and the supply and demand for mortgage-backed securities (bundles of home loans sold to investors). On a daily basis, rates fluctuate based on major economic news, such as inflation and employment reports, which signal to investors where the economy is headed.
...in as little as 3 minutes – no credit impact
¹ Example for illustrative purposes only. Assumes a $400,000 loan amount, 30-year fixed-rate mortgage, and principal and interest payments only. Rates, payments, and savings shown are estimates and may vary based on credit profile, market conditions, and other factors. Taxes, insurance, and other costs not included. Not a commitment to lend.