Don’t Wait for Rock-Bottom Mortgage Rates: Here’s What to Expect in 2026

If you’ve been sitting on the sidelines of the housing market waiting for mortgage rates to plummet, we have some news you need to hear. Despite the Federal Reserve cutting interest rates, experts are predicting that mortgage rates will hover around 6% throughout 2026—and that might actually be the new normal.

The Current State of Mortgage Rates

Good news first: mortgage rates have come down from their peak. After climbing above 7% in January, the average rate on a 30-year fixed mortgage now sits at 6.3%, according to Freddie Mac data. That’s the lowest we’ve seen in about a year.

But here’s the reality check—we’re still far from the sub-3% rates that made homebuying feel like a once-in-a-lifetime opportunity back in 2021.

Why Aren’t Mortgage Rates Falling Faster?

You might be wondering: if the Fed is cutting rates, why aren’t mortgage rates following suit? The answer lies in understanding how mortgage rates actually work.

It’s About Bonds, Not Just the Fed

While news headlines often focus on Federal Reserve decisions, mortgage rates don’t actually follow the Fed’s moves directly. Instead, they track something different: long-term Treasury bond yields, particularly 10-year bonds.

These bond yields respond to what investors think will happen with inflation and economic growth over the next several years. And right now, two big factors are keeping those yields elevated:

The Fed only directly controls very short-term interest rates. Sometimes those move together with longer-term rates, but not always. In fact, while the federal funds rate held steady through September, the 10-year Treasury yield actually dropped from 4.7% in January to 4.1% this month—and mortgage rates fell from 7.0% to 6.3% during that same period.

The Market Already Saw This Coming

Here’s something interesting: some of the recent drop in mortgage rates happened before the Fed even made its September cut. How? Markets are forward-looking.

“Both the 10-year Treasury yield and the 30-year fixed mortgage rate react before the actual action from the Fed,” explains Nadia Evangelou, senior economist at the National Association of Realtors. “It’s about sentiment.”

In other words, when investors become confident about the Fed’s next move, bond yields start adjusting in anticipation. This means that future rate cuts may already be baked into today’s mortgage rates.

What Changed from Last Year?

Remember 2024? Mortgage rates actually increased after the Fed’s rate cut that year, jumping from 6.08% in mid-September to above 7.00%. This year looks different, and there’s a good reason why.

Back then, the economy was running hot—the job market was strong and growth was robust. But in 2025, the labor market has cooled considerably, giving the Fed more flexibility to cut rates without stoking inflation. This shift is helping reduce volatility in mortgage rates.

As Fed Chair Jerome Powell noted in his September press conference, “We don’t set mortgage rates, but our policy rate changes do tend to affect mortgage rates.” He emphasized that while a strong economy is good for housing, affordability and supply challenges remain beyond the Fed’s control.

The 2026 Forecast: Steady at 6%

So what should homebuyers expect going forward? Industry experts are remarkably consistent in their predictions:

Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, projects mortgage rates will remain around 6.0% by the end of 2026, even if the Fed cuts rates to 2.875%—that would be 125 basis points lower than today’s target range of 4.00%-4.25%.

Fannie Mae forecasts an average rate of 5.9% for 30-year fixed mortgages by the end of 2026.

NAR’s Evangelou expects rates to gradually decline to around 6.2% for the remainder of this year, then average about 6% in 2026. She anticipates “a gradual decline in both policy rates and the term premium”—the extra yield investors demand for tying up their money in longer-term bonds.

The bottom line? We’re looking at relative stability compared to the volatile swings of recent years.

What This Means for Homebuyers

“We don’t expect any big changes,” says Evangelou. “It’s an adjustment phase.” The combination of rates, prices, and supply remains the biggest challenge for potential buyers.

But here’s an encouraging data point: even a seemingly modest drop from 7% to 6% means more than 5 million additional households can afford to buy a home at the median price, according to NAR data.

The New Normal

The message is clear: those rock-bottom pandemic-era rates aren’t coming back anytime soon. Sticky inflation and a resilient economy will keep mortgage rates elevated compared to 2020-2021 levels.

For prospective homebuyers, this means adjusting expectations and strategies. Rather than waiting for a dramatic rate drop that may never come, focus on what you can control—your down payment, credit score, and finding the right property in this new rate environment.

The housing market is entering a period of greater stability. While 6% might feel high compared to recent history, it’s important to remember that it’s still relatively low by historical standards. The key is adapting to this new reality rather than waiting for conditions that may never return.

To read more about this topic, visit Why Mortgage Rates Might Not Keep Going Down | Morningstar.