Interest Rates Were Cut — What Will Mortgage Rates Look Like in 2026?

The Federal Reserve cut its key interest rate by a quarter point (25 basis points) at the December FOMC meeting, placing the overnight borrowing rate in the 3.5%-3.75% range.

GOBankingRates consulted experts to gather their predictions about what will happen to mortgage rates in the coming year. While many believe that interest rate decisions are the only thing responsible for mortgage rates, that’s not the case. When predicting mortgage rates, it’s important to consider current market conditions, including tariffs, overall inflation, stagnant wages, and other factors.

Here’s what financial experts think mortgage rates will look like in 2026 now that the Fed has cut rates three times in 2025 …

How the New Fed Rate (Isn’t) Affecting Mortage Loans

At the post-meeting news conference, Fed chair Jerome Powell said, “We are well positioned to wait and see how the economy evolves.” An article on CNBC noted that the vote had three members against the rate decision, the first time that has happened since September 2019.

However, the Mortgage Bankers Association said that total mortgage application volume fell 3.8% for the week ending December 12 compared with the previous week. Mike Fratantoni, MBA’s SVP and Chief Economist, commented in the press release, “Mortgage rates inched up last week following the FOMC meeting, as investors interpreted the comments to signal that we are near the end of this rate-cutting cycle.”

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Mortgage Rates Won’t Change Much

“Unless something drastically changes, I don’t see any large rate cuts on the horizon in 2026, ” said Ralph DiBugnara, a real estate expert and president of Home Qualified. “In the last meeting for December, we saw a minimal rate cut that was not even a unanimous vote amongst the voters within the Fed.”

He said that since the vote wasn’t unanimous, board members aren’t aligned, and we may only see interest rates decrease slightly in 2026. DiBugnara said that chairman Powell needs to be more aggressive in bringing down interest rates

“I don’t see a light at the end of the tunnel for affordability,” otherwise, he said. “I believe they are conflicted on what is actually driving inflation because of new factors such as tariffs impacting how money is being spent.”

According to recent data from Fortune, mortgage rates remained relatively unchanged as of December 19, with the average interest rate for a 30-year fixed-rate conventional loan at 6.208%, down just 0.04% from the previous week.

Mortgage Rates Will Remain Higher Than Expected

“Looking ahead to 2026, in the wake of the Fed’s recent rate cuts, mortgage rates are likely to remain higher than many borrowers would like but not dramatically out of line with historical norms,” said Jeffrey M. Ruben, a real estate/finance expert and the president of WSFS Home Lending at WSFS Bank. He doesn’t expect a return to the ultra-low mortgage rates we saw during the pandemic era, but he does believe rates will come down slightly in 2026.

Ruben emphasized that in the decade before the pandemic, mortgage rates were just under 5%, which he sees as being closer to a point of equilibrium than the extremes we’ve seen over the past few years. “Recent rate cuts have been aimed at supporting the labor market, but ongoing inflation pressures, trade policy uncertainty, and stagnant wage growth have kept investors cautious, leaving the 10-year Treasury and mortgage rates elevated rather than falling in the traditional way,” he said.

Mortgage Rates Will Drop a Little Bit (5.9%-6.1%)

Michael Merritt, the SVP of customer care and default mortgage servicing at BOK Financial, noted that there’s cautious optimism for rate relief in 2026. He added, “Most models predict rates will continue to move lower, reaching levels between 5.9% and 6.1%.” He stressed that the volatility of the 10-year Treasury bond means forecasts are subject to change, but acknowledges that a modest drop could unlock affordability for millions.

It’s worth pointing out that the National Association of Realtors (NAR) estimated in July that rates dipping below 6% would make median-priced homes affordable for 5.5 million more households. Merritt believes that lower mortgage rates will also bring millions of borrowers into the market for refinancing, potentially driving a wave of activity.

Mortgage Rates Will Drop to the Mid-to-Upper 5% Range

“I think it’s only a matter of time before rates drop below 6% and remain in the mid-to-upper 5% range for most of 2026,” said Darren Tooley, a financial expert and senior loan officer at Cornerstone Financial Services. “It’s also important to note the mortgage spread, which is the difference between the 10-year Treasury and the 30-year fixed mortgage rate, remains above historical averages.”

Tooley noted that even with the Fed cutting rates, mortgage rates don’t move in lockstep with them. “Mortgage rates are determined by the price of Mortgage-Backed Securities (MBS), which is primarily driven by economic factors such as long-term inflation expectations, the strength of the labor market and overall market confidence,” he clarified.

While he expects rates to drop in 2026, he doesn’t believe we will reach the 3% range anytime soon. He cited some of the following factors that are essential to pay attention to:

• What will happen with the monthly reports documenting new job creation, since they have been consistently underwhelming.

• Wage growth and affordability challenges could limit how rates could go without putting further stress on the housing market.

“While I do believe rates will drop next year, it’s important to remember that rates never move in a straight line and will always have ebbs and flows,” Tooley said. “We may see brief rate increases throughout the year due to several factors, but unless the economy shows clear signs of strengthening, overall rates will decline.”

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