You've probably heard the rumors. Maybe you've seen the headlines. Everyone wants to know the same thing: are we finally going to see some real relief on housing costs? If you’re sitting on the sidelines waiting for the "perfect" time to buy or refinance, the answer to will mortgage rates go down isn't as simple as a yes or no. It's a bit of a "yes, but..." situation.
Honestly, the start of 2026 has been a bit of a roller coaster. As of January 17, 2026, the national average for a 30-year fixed mortgage is hovering right around 6.11%, according to Bankrate. Freddie Mac actually pegged it at 6.06% just a couple of days ago. Compare that to the 7.04% we were seeing this time last year, and yeah, things are moving in the right direction. But don't expect a free-fall.
The Federal Reserve’s Game of Musical Chairs
Let's talk about the Fed. There is a new vibe in Washington. Jerome Powell’s term ends this May, and the buzz is all about who President Trump will pick to replace him. Names like Kevin Hassett and Kevin Warsh are being tossed around. Why does this matter to your monthly payment? Because these frontrunners are expected to be much more aggressive about cutting rates than the current committee.
The Fed cut rates three times in 2025, landing the federal funds rate in the 3.50% to 3.75% range. But here’s the kicker: mortgage rates don't move in lockstep with the Fed. It’s a common mistake. You’ll see the Fed cut rates, and then mortgage rates actually rise because the bond market is worried about inflation. It's frustrating.
Why the 10-Year Treasury is Your Real North Star
If you want to know will mortgage rates go down, stop watching the Fed and start watching the 10-year Treasury yield. Mortgage lenders basically use the 10-year yield as their benchmark. Currently, that yield is sitting around 4.19%. Some bold analysts, like those over at The Motley Fool, are predicting that yield could drop below 3.5% by the end of the year. If that happens, we could see the 30-year fixed rate hit 5.5%.
That would be a massive win for buyers.
What the Big Names are Predicting for 2026
The experts are split. It’s like watching a group of people try to guess the weather in a city they've never visited. Fannie Mae is feeling relatively optimistic, projecting that we might see rates dip to 5.9% by the end of the year. On the flip side, the Mortgage Bankers Association (MBA) is a bit more cautious, thinking we'll stay stuck in the mid-6% range for most of 2026.
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Here is the breakdown of the current end-of-year forecasts:
- Fannie Mae: 5.9%
- MBA: 6.4%
- National Association of Homebuilders: 6.23%
- Wells Fargo: 6.25%
- S&P Global Ratings: 5.77%
It's a mixed bag. The general consensus is "stability." We are likely done with the days of 8% rates, but we are also nowhere near the 3% rates of the pandemic. That was a once-in-a-lifetime fluke. If you're waiting for 3% again, you might be waiting for a very long time.
The Trump MBS Plan: A Wildcard
There is this new $200 billion plan from the Trump administration to purchase mortgage-backed securities (MBS). Some people think this is just another round of "quantitative easing," but it’s actually a bit different. It's designed to act as a hedge. The goal is to keep rates from spiking back up if the economy gets weird. It’s basically the government trying to put a ceiling on how high rates can go, which provides some much-needed predictability for lenders.
The Hidden Danger of Waiting Too Long
Here is the irony of the housing market: when rates go down, prices often go up. It’s basic supply and demand. Currently, the market is in a "slump" because affordability is so bad. But the moment the 30-year fixed rate drops significantly below 6%, a flood of buyers who have been "renting and waiting" are going to jump back in.
If everyone waits for 5.5% to buy, you’ll end up in a bidding war that adds $30,000 to the price of the house. Suddenly, that lower interest rate doesn't save you any money because your loan balance is higher. Realtor.com projects home prices will still rise by about 2.2% this year. It's not the massive jump we saw a few years ago, but it’s still an increase.
Real-Life Math: Does 0.5% Really Matter?
Let’s look at a $400,000 mortgage.
At a 6.5% interest rate, your monthly principal and interest payment is about $2,528.
Drop that rate to 5.8%? Your payment hits $2,347.
That’s $181 a month. Over a year, that’s over $2,100 back in your pocket. It’s enough to cover a nice vacation or a lot of groceries. So yeah, it matters. But is it worth losing the house you love because you were holding out for another 0.25% drop? Probably not.
Actionable Steps for Borrowers in 2026
If you're asking will mortgage rates go down because you need to move soon, don't just sit there. The market is moving, even if it feels slow.
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1. Watch the Refinance Window
If you bought in late 2023 or 2024 when rates peaked near 8%, you should be talking to a lender right now. Refinance applications jumped 40% last week alone. You don't need to wait for 5% to save money. If you can drop your rate by 1% or more, the "break-even" point usually happens within a couple of years.
2. Consider the 15-Year Fixed
If you can swing the higher monthly payment, 15-year rates are already looking great. They are averaging around 5.38% right now. You’ll save a staggering amount of interest over the life of the loan.
3. Don't Ignore FHA and VA Loans
Government-backed loans often have slightly lower rates than conventional ones. Right now, FHA 30-year rates are around 5.78%. If you have a lower credit score, this is often your best path to a sub-6% rate.
4. Get a "Float-Down" Option
If you are under contract to buy a home, ask your lender about a float-down provision. This lets you lock in today's rate but gives you a one-time chance to lower it if rates drop significantly before you close. It's the best of both worlds.
The bottom line is that 2026 is a year of "normalization." The extreme volatility of the last few years is fading. We are settling into a world where 5.8% to 6.2% is the new normal. It might not be the "bargain" of 2021, but it's a hell of a lot better than where we were eighteen months ago. Use this stability to your advantage, fix your credit, save that down payment, and be ready to move when the right house—not just the right rate—appears.
- Audit your current rate: If you’re above 7.25%, call a lender this week to run a "break-even" analysis on a refinance.
- Monitor the 10-year Treasury: Watch for any dips below 3.8%; that’s usually the signal that mortgage rates are about to tick down further.
- Get pre-approved now: With inventory still 12% below pre-pandemic levels, being ready to move quickly is more important than timing the market by a few basis points.