Good News Ahead: Mortgage Rates Expected to Drop Below 6% by 2026
If you’ve been holding off on buying a home because of high mortgage rates, there’s reason to feel optimistic. According to Fannie Mae’s latest housing forecast, mortgage rates are expected to gradually decline over the next two years, with the 30-year fixed rate projected to drop to around 6.4% by the end of 2025 and dip below 6% by late 2026.
While these rates aren’t as low as what we saw a few years ago, even a modest decline can make a big difference in affordability. Lower monthly payments could help more buyers qualify for mortgages and finally make the move from renting to owning.
This shift is also expected to bring more activity back to the market. Home sales are projected to increase from about 4.7 million in 2025 to more than 5 million in 2026. Mortgage lending is also expected to rise as more buyers step in and homeowners take advantage of refinancing opportunities. In fact, refinances could make up more than a third of all new mortgages by 2026, giving many current owners a chance to lower payments or tap into home equity.
Of course, some challenges remain. Inventory is still tight, and home prices are unlikely to drop significantly in the near term. But with interest rates trending downward, the next couple of years may bring the most favorable conditions buyers and sellers have seen in a while.
What this means for you:
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Buyers: If you’re ready to purchase now, you don’t have to wait. But if timing isn’t urgent, know that borrowing costs may improve in the coming years.
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Sellers: As rates fall, more buyers will re-enter the market—meaning increased demand for your home.
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Homeowners: If you bought when rates were higher, keep an eye on refinance opportunities down the road.
The bottom line? Brighter days are ahead for the housing market. Whether you’re planning to buy, sell, or simply stay put, understanding these trends can help you make the most of your options.