Will Mortgage Rates Go Down in 2026: Predictions Say “Yes”

Trying to figure out where mortgage rates are headed is like trying to predict the weather – there are a lot of factors at play! If you're wondering will mortgage rates go down in 2026?, the answer is likely yes, but it's not a done deal. Based on current economic forecasts, rates could drop to somewhere between 6.17% to 6.67%, which is a bit lower than the 6.94% we're seeing in early 2025. This potential decrease hinges on things like the Federal Reserve cutting rates and lower Treasury yields. But hold on – there's more to the story.

Will Mortgage Rates Go Down in 2026?

Current Mortgage Rate Situation

Let's take a snapshot of where we stand right now. As of February 24, 2025, the average 30-year fixed mortgage rate is sitting around 6.94%, according to Bankrate. This number is heavily influenced by the 10-year Treasury yield, which is hovering around 4.27% (you can check that out on FRED).

Think of it like this: the 10-year Treasury yield is like the base price, and then lenders add a bit extra – what they call a “spread” – to cover their costs and risks. Currently, that spread is about 2.67%, as Fannie Mae explains, accounting for things like the risk that people might pay off their mortgages early or that they might default.

Why We Might See Lower Mortgage Rates in 2026

So, what makes economists think rates could go down? Here's the breakdown:

• The Fed's Expected Moves: The Federal Reserve (the Fed) is like the conductor of the economy's orchestra. Right now, the expectation is that they will be cutting interest rates in the near future. Most forecasts, including those from CCN, suggest the federal funds rate will be around 3% by the end of 2025 and 2.9% by the end of 2026.
• Lower Treasury Yields: The 10-year Treasury yield is expected to drop as well. Bankrate predicts it could be around 4.14% by December 2025, and some forecasts, like those from Statista, even suggest it could hit 3.39% by January 2025, with further declines possible in 2026.

Basically, if the Fed cuts rates and Treasury yields fall, mortgage rates should follow suit.

How Low Could Mortgage Rates Go in 2026?

If we assume that the spread between the 10-year Treasury yield and mortgage rates stays around 2.67% (which, admittedly, is a big “if”), we can make some educated guesses:

• If the 10-year Treasury yield drops to 3.5%, mortgage rates could be around 6.17% (3.5% + 2.67% = 6.17%).
• If the 10-year Treasury yield drops to 4.0%, mortgage rates could be around 6.67% (4.0% + 2.67% = 6.67%).

The Spread: A Wildcard

Now, here's where things get tricky. That 2.67% spread isn't set in stone. As the Richmond Fed points out, it tends to increase during times of economic stress. On the other hand, Brookings suggests that recent widening has been due to specific Fed actions. If the economy stabilizes, that spread could narrow, leading to even lower mortgage rates. But if uncertainty creeps in, it could widen, meaning rates might not fall as much as predicted.

The Trump Factor: Throwing a Wrench in the Gears?

This is where it gets really interesting. The potential return of a Trump administration adds a whole new layer of complexity to the equation. Trump's proposed economic policies – things like tax cuts, deregulation, and tariffs – could have a significant impact on inflation and, in turn, on interest rates.

• The Good: Some argue that tax cuts and deregulation could boost economic growth, as Invesco US points out.
• The Bad: However, tariffs and immigration restrictions could raise prices, as CBS News reports, leading to higher inflation. As Project Syndicate notes, higher inflation could force the Fed to rethink its plans for cutting rates.

This uncertainty is reflected in some market forecasts, with Reuters reporting that some analysts believe the 10-year yield could even climb to 5% if Trump's policies lead to higher inflation.

Global Economics: We're All Connected

We can't forget about what's happening in the rest of the world. Trade tensions, geopolitical events, and the overall health of the global economy can all influence U.S. interest rates. McKinsey highlights trade policy changes as a major concern for 2025, which could definitely affect Treasury yields.

Putting It All Together: The 2026 Mortgage Rate Outlook

Okay, let's try to make sense of all this. Here's a table summarizing different scenarios for 2026 mortgage rates, based on varying 10-year Treasury yields (assuming that constant 2.67% spread):

Scenario	10-Year Treasury Yield (2026)	Expected Mortgage Rate (2026)	Change from Current (6.94%)
Base Case	3.5%	6.17%	-0.77%
Higher Yield Scenario	4.0%	6.67%	-0.27%
Lower Yield Scenario	3.0%	5.67%	-1.27%

Important Note: These are just estimates! Real-world mortgage rates will depend on a whole host of economic conditions and policy changes that are impossible to predict with certainty.

My Take on the Situation

As someone who's been watching the housing market for years, I can tell you that predicting mortgage rates is always a bit of a guessing game. While the current forecasts suggest a likely decrease in rates by 2026, the influence of factors like the potential Trump administration and global economic conditions makes it difficult to say for sure. It's a complex situation, and the exact extent of any decrease remains uncertain.

Personally, I think it's wise to be cautiously optimistic. The Fed seems determined to bring inflation under control, which should lead to lower rates eventually. However, potential policy changes could throw a wrench in the works.

What Should Homebuyers Do?

If you're thinking about buying a home, here's my advice:

• Stay informed: Keep an eye on economic news and forecasts. Pay attention to what the Fed is saying and doing, and be aware of potential policy changes that could affect the economy.
• Shop around: Don't just go with the first mortgage lender you find. Get quotes from multiple lenders to make sure you're getting the best possible rate.
• Consider your personal circumstances: Can you afford a home at current rates? How long do you plan to stay in the home? These are important questions to ask yourself.
• Don't try to time the market: Trying to perfectly time the market is a fool's errand. Focus on finding a home you love and can afford.

The Bottom Line

Based on current research, mortgage rates are likely to decrease in 2026. We could see rates somewhere between 5.67% and 6.67%, which would be a welcome change from the 6.94% we're seeing now. This decrease is likely to be driven by Fed rate cuts and lower Treasury yields. However, the potential impact of Trump's policies adds uncertainty to the outlook.

In conclusion, while a decrease seems probable, the extent remains uncertain, and homebuyers should monitor economic developments closely.