Where Mortgage Rates May Land in 2026

Forecasting the U.S. real estate market for 2026 is more uncertain than in recent years. Home prices remain near record highs, mortgage costs continue to challenge affordability, and economic direction is far from settled.

At the center of it all is one critical question:

How low can mortgage rates realistically go in 2026?

The cost of borrowing will be one of the most influential forces shaping buyer demand, seller activity, and overall market momentum this year.

Federal Reserve Cuts: Why the Market Barely Reacted

In December, the Federal Reserve lowered the federal funds rate to 3.75%, marking its third rate cut since September. Yet the housing market responded with little enthusiasm.

That muted reaction highlights an important reality:
👉 Small rate cuts alone are not enough to restart housing activity.

While the federal funds rate does not directly control mortgage rates, it influences borrowing costs across the financial system. When banks can borrow more cheaply, mortgage rates often follow — but with delays and limits.
Federal Reserve – Monetary Policy Overview
👉 https://www.federalreserve.gov/monetarypolicy.htm

As we move into early and mid-2026, buyers and sellers will be watching not just rate changes, but Fed guidance, leadership changes, and political pressure surrounding future cuts.

Fed Leadership Uncertainty Adds Pressure

Another layer of uncertainty comes from the impending change in Federal Reserve leadership.

Two leading candidates for Fed Chair — Kevin M. Warsh and Kevin A. Hassett — would likely face strong political pressure to continue lowering rates. The President has publicly stated a desire to see the federal funds rate drop as low as 1%, increasing speculation around future monetary policy.

Despite this pressure, major financial institutions remain cautious, recognizing the risks of inflation, wage growth, and economic overheating.

What the Major Institutions Are Forecasting

While no one expects a dramatic plunge in mortgage rates, several key institutions have released forecasts that give us a clearer range for 2026.

Fannie Mae: The Most Optimistic Outlook

Fannie Mae projects mortgage rates falling from an average 6.35% to around 5.9%, citing expectations for at least two additional federal funds rate cuts.
Fannie Mae Housing Forecast
👉 https://www.fanniemae.com/research-and-insights/forecast

This would place rates near a psychological threshold that could begin pulling hesitant buyers back into the market.

National Association of Realtors (NAR): Cautious Optimism

The National Association of Realtors forecasts mortgage rates hovering near 6%. While helpful, this level alone may not be enough to significantly shift buyer behavior in the next 12 months.
NAR Economic Forecast
👉 https://www.nar.realtor/research-and-statistics/housing-statistics

NAR has consistently emphasized that greater affordability, not just availability, is the key to boosting home sales.

Mortgage Bankers Association (MBA): Rates Stay Elevated

The Mortgage Bankers Association expects mortgage rates to remain closer to 6.4%, pointing to continued wage growth and inflationary pressure as limiting factors for rate reductions.
MBA Mortgage Rate Forecast
👉 https://www.mba.org/news-and-research/forecasts

Wells Fargo & NAHB: A Middle Ground

Both Wells Fargo and the National Association of Home Builders (NAHB) project mortgage rates settling in the 6.2%–6.25% range, reflecting modest improvement but no dramatic relief.
Wells Fargo Housing Market Commentary
👉 https://www.wellsfargo.com/economic-insights/

NAHB Housing Forecast
👉 https://www.nahb.org/news-and-economics/housing-economics

What This Means for Buyers and Sellers in 2026

The consensus is clear:
🔹 Mortgage rates are likely to decline modestly, not dramatically
🔹 A return to sub-5% rates is unlikely in the near term
🔹 Stability matters more than sharp drops

For buyers, even a move into the high-5% or low-6% range could improve affordability and purchasing power — especially when combined with slower price growth.

For sellers, expectations must align with reality. Lower rates may increase demand slightly, but pricing and preparation will remain critical.

Bottom Line

Mortgage costs in 2026 are unlikely to fall far — but they don’t need to.

A gradual decline, combined with stabilizing prices and improved inventory, could be enough to loosen the housing market’s current gridlock. Rather than waiting for a dramatic rate drop, buyers and sellers alike may find opportunity in a market defined by balance instead of frenzy.