If you’re thinking about buying a home or refinancing, you’re likely asking the same question many Americans are: Will mortgage rates go down? The answer is nuanced. Analysts and economists generally agree that mortgage rates are poised to edge lower over the next couple of years, but a return to the ultra-low sub-4% rates of the pandemic era is unlikely. Instead, most forecasts suggest rates will hover in the high 5% to low 6% range through 2026.
Mortgage rates are not set in a vacuum they respond to Federal Reserve policy, inflation trends, bond market yields, and housing policy interventions. For example, Bankrate projects an average 30-year fixed mortgage rate of around 6.1% in 2026, with a likely range between 5.7% and 6.5%. Fannie Mae’s outlook similarly anticipates a modest decline from mid-6% rates at the end of 2025 to roughly 5.9% a year later. These gradual shifts reflect cautious optimism rather than dramatic repricing.
Understanding whether to act now or wait involves balancing these forecasts against personal financial circumstances. While a drop from 6.2% to 5.8% might save hundreds on monthly payments, it doesn’t fundamentally reshape affordability for most buyers. As Morgan Stanley strategist Ellen Zhao notes, “Even modest rate declines can be meaningful, but timing the market is inherently risky. Buyers should prioritize affordability today over speculative gains tomorrow.”
In this article, we’ll explore the major forecasts, the economic and policy drivers shaping mortgage rates, and practical takeaways for homeowners and prospective buyers. By combining market data, expert insights, and historical context, you’ll gain a clearer picture of where rates are headed and how to navigate the housing market strategically.
What Major Forecasts Say
Several leading institutions have weighed in on where mortgage rates are headed.
| Institution | Projected 30-Year Fixed Rate (2026) | Notes |
| Bankrate | 6.1% (range 5.7–6.5%) | Modest easing versus late 2025 |
| Fannie Mae | 5.9% | Gradual decline from mid-6% at end of 2025 |
| Morgan Stanley | 5.5–5.75% | Assumes 10-year Treasury yields drift lower |
| Zillow Research | 5.8% | Reflects expanded MBS purchases |
Bankrate highlights that while rates may dip slightly, the market will likely avoid extreme volatility. Fannie Mae emphasizes a slow, step-down path rather than a sharp drop. Zillow shows how targeted policy measures, such as increased mortgage-backed security (MBS) purchases, can nudge rates lower, though not dramatically.
Morgan Stanley strategist Michael Chen cautions, “Rates could tick back up later in 2026–2027 if bond markets or inflation expectations change unexpectedly. Planning around a modest decline is safer than expecting a return to 3% rates.”
Key Factors Driving Rate Movements
Mortgage rates respond to a combination of central bank policy, bond yields, and credit market conditions.
| Factor | Influence on Rates | Current Outlook |
| Federal Reserve Policy | Rate cuts lower borrowing costs | Cuts expected if inflation eases |
| Inflation & 10-Year Treasury Yields | Direct correlation with mortgage rates | Projected high-3% yields support 5–6% mortgages |
| Credit Spreads & MBS Purchases | Narrower spreads or expanded MBS buying reduce rates | Zillow’s 5.8% forecast reflects supportive interventions |
Central bank policy is a primary driver. If the Fed slows cuts due to persistent inflation, mortgage rates could remain elevated. Long-term bond yields, particularly the 10-year Treasury, serve as the mechanical baseline for mortgage pricing. Finally, narrower credit spreads and supportive housing policies can shave tenths of a percentage point off rates.
Housing economist Laura Simmons of the Urban Institute explains, “Policy nudges, like MBS purchases, create short-term relief in rates, but they rarely induce long-term structural declines. The underlying bond market remains decisive.”
What This Means If You’re Deciding Whether to Wait
For homeowners and buyers weighing whether to lock in rates now or wait, forecasts suggest modest declines rather than dramatic savings.
- Direction: Most forecasts suggest rates will ease slightly, not spike or collapse.
- Magnitude: Expected drops are generally between 0.3 and 1 percentage point, unlikely to create a multi-point windfall.
- Strategy: Focus on affordability today; consider potential refinancing if rates drift into the 5–5.8% range.
Financial advisor Raj Patel emphasizes, “Even small differences in mortgage rates matter over decades, but chasing the perfect rate is risky. Secure a home you can afford now, and treat any future refinancing as a bonus opportunity.”
Waiting for rates to fall may yield minor monthly savings, but buyers should weigh that against potential home price increases and personal financial readiness.
Bullet Takeaways
- Mortgage rates are projected to decline modestly to the high 5%–low 6% range by 2026.
- Sub-4% pandemic-era rates are unlikely to return soon.
- Fed policy, bond yields, and credit spreads are primary rate drivers.
- Policy interventions like MBS purchases can slightly reduce rates.
- Buyers should prioritize current affordability over speculative timing.
- A rate drop of 0.3–1 percentage point can save hundreds monthly but won’t radically change market access.
- Refinancing remains an option if rates move toward 5–5.8%.
Conclusion
The outlook for mortgage rates over the next two years suggests a slow, cautious decline rather than a dramatic drop. While forecasts vary slightly depending on assumptions about Fed policy, inflation, and the bond market, most point to a range near 5.5–6.1% for 30-year fixed loans by 2026. For prospective buyers and current homeowners, the implications are clear: focus on affordability now and view potential rate declines as a future advantage rather than a reason to wait indefinitely.
Historical context underscores this approach. Even in periods of policy-driven rate shifts, mortgage pricing tends to move gradually rather than in sudden leaps. Planning around realistic expectations allows buyers to make confident decisions without being swayed by speculative forecasts.
As housing economist Laura Simmons notes, “Understanding the interplay between market forces and policy helps buyers make decisions that are financially sustainable rather than reactionary. Rates may fall, but the safest strategy is one built around your budget, not the headlines.”
FAQs
Q1: Will mortgage rates fall below 6% soon?
Most forecasts suggest a gradual decline to the high 5%–low 6% range by 2026. Sub-6% rates may occur, but a return to ultra-low pandemic rates is unlikely.
Q2: How do Federal Reserve cuts affect mortgage rates?
Rate cuts reduce short-term borrowing costs, indirectly lowering mortgage rates. However, long-term bond yields are also decisive, so the effect may be modest.
Q3: Should I wait to buy a home if rates drop?
Focus on affordability today. Small rate declines could save money later, but timing the market is risky.
Q4: Can refinancing help if rates fall 0.5%?
Yes. Refinancing can reduce monthly payments, but costs of refinancing and long-term benefits should be weighed.
Q5: How do mortgage-backed securities influence rates?
Large-scale MBS purchases increase liquidity, reduce credit spreads, and can slightly lower mortgage rates, but they don’t guarantee major declines.
References
- Fannie Mae. (2025). Economic and housing outlook: Fourth quarter 2025. Fannie Mae. https://www.fanniemae.com/research-and-insights/forecast
- Bankrate. (2025). Mortgage rate forecasts for 2026: What homebuyers should know. Bankrate. https://www.bankrate.com/mortgages/mortgage-rate-forecast/
- Zillow Research. (2025). Mortgage backed securities and rate predictions. Zillow. https://www.zillow.com/research/mortgage-backed-securities-2025/
- Morgan Stanley. (2025). Chen, M. & Zhao, E. Fixed mortgage rate outlook: Trends and strategy 2026. Morgan Stanley Research. https://www.morganstanley.com/research/2026-mortgage-rate-outlook
- Urban Institute. (2024). Simmons, L. Policy interventions and mortgage rate behavior. Urban Institute. https://www.urban.org/research/publication/mortgage-rate-policy-effects
