Mortgage Rates Falling: Freddie Mac’s Outlook

With 2025 out of the way, homeowners, economists, Realtors and home buyers are developing or revising their their view of this year’s housing and mortgage markets.

Of course, it’s more than lower rates on their minds. It’s down payments, home prices, inflation, employment trends, loan terms, length of mortgage period, and taxes. The question then, is will lower mortgage rates make home buying possible?

We know home sales have dropped to new lows and prices have flattened, and that is impacting the state of mortgage applications. Still, we did see another short spike in mortgage applications, so we know homeowners are trying to refinance their mortgages.

It’s anyone’s guess about rate forecasts.  Now in February, inflation is cooling, job market is cooling, and consumer spending is a question mark.  Battles in the courts, geopolitical wars, and potential rising inflation are creating uncertainty that even even top analysts can’t calculate.  One thing for sure, interest rates and mortgage rates have been held stubbornly high for an extended period, a situation that doesn’t help revive the US economy.

You’ll find expert mortgage rate forecasts below.

A New Year Brings New Views, Hope and Expectations

The new year washes away old concepts, media propaganda, and outdated statistics with new estimates on the Trump/FED battle, economic threats, opportunity, as well as a potential economic recovery. Chances are, 2026 will enjoy lower mortgage rates. The drop might translate to many thousands of dollars in savings for you.  It’s welcome news for home buyers witnessing big growth in home listings, and lower monthly mortgage rates.

If you’ve saved funds and are ready to buy, you might just be able to buy your dream home with a much better rate (but not your dream mortgage rate). It’s unlikely home prices will fall much further as the US economy is growing and low supply puts a floor on prices in most states. Some markets in the south have seen big price drops, while others in the Northeast have had big increases. Again, supply is a big factor.

Let’s have a look at the cold hard facts about the markets:

January US Mortgage Rates

You might be asking “Is my mortgage rate too high” and “where can I find a better rate?” As laid out in a recent post on why mortgage rates must fall, rates are stubbornly high. Shopping for a better rate is the only solution.

• Freddie Mac’s (PMMS) 30-year fixed rate mortgage averaged 6.16% (as of Jan 8, 2026) and their 15-year fixed rate slid to 5.46%.
• Last year, Freddie Mac’s 30-year mortgage was notably higher (6.93%), showing the mortgage market is improving slowly from last year’s.

Main Factors Keeping Mortgage rates High

1) The 10-year Treasury yield (the “gravity” under mortgage rates)

Mortgage rates tend to follow longer-term bond yields—especially the 10-year Treasury—because mortgages are priced off similar-duration funding and mortgage-backed securities (MBS). When the 10-year rises, mortgage rates usually rise; when it falls, they often ease.

2) The mortgage–Treasury “spread” (extra risk premium)

Even if Treasury yields improve, mortgage rates may not fall as much if lenders/investors demand a bigger cushion. NAHB noted a spread around 215 bps at one point reflecting lingering uncertainty in mortgage/MBS markets. High rates then can be sticky.

3) Fed policy and inflation expectations

The Fed doesn’t set mortgage rates directly, but it strongly influences them through:

• expectations for the path of short-term rates, and
• financial conditions that flow into longer-term bond yields and MBS pricing.

Realtor.com explicitly ties its 2026 rate view to macro conditions like slowing growth and the wind-down of quantitative tightening (QT) as offsetting forces.

4) US Jobs and GDP Growth data

Stronger growth and sticky inflation tend to keep yields—and mortgage rates—higher. Some major-bank commentary has leaned toward a “higher-for-longer” vibe for 2026 (not a sharp rate drop).

5) Housing-Market Impact

Millions of American homeowners are preferring to stick with their ultra-low pandemic-era mortgages, discouraging them from any thoughts of selling.  Many might let go of them if the new mortgage rate was to fall below 5%. This would restart the ailing mortgage market and give the housing market its health back. With mortgage rates expected to decline very little, we might not expect a big boom in mortgage-backed sales and first-time homebuyers numbers will likely stay static.

Institutional Mortgage Rate Forecasts for 2026

• Realtor.com: expects the 30-year fixed to average ~6.3% through 2026.
• Zillow: expects a gradual descent toward ~6% by end of 2026, while also warning rates are unlikely to fall meaningfully below 6% in 2026.
• Fannie Mae (ESR): forecast rates ending 2026 around 5.9% (from its Sept 2025 outlook).
• MBA (via Forbes Advisor summary): expects the 30-year fixed to end around 6.4% (i.e., a stickier, higher-rate scenario).
• Bank of America predicts no more Fed rate cuts before Powell’s term ends in May and that mortgage rates to remain high
• The NAHB predicts the average 30- year fixed mortgage rate will settle between 6.0% and 6.4%, likely averaging around 6.15%.

Expert Consensus on Mortgage Rates: Will Hover from 6.0 to 6.4%

As you can see, expert’s mortgage rate forecasts cluster around ~6.0% to ~6.4% for 2026, with 6.3% a very common midpoint. This might help guide your expectations as you search for the lowest mortgage rates for buying a home or for refinancing a better rate. With Citibank currently offering mortgage rates as low as 5.7, it’s wise to shop around for a great rate.

What Do These Mortgage Rate Levels Mean for the U.S. housing market outlook?

Sales: Sales grow, but no boom in sight, nor a market crash

• 2025 existing-home sales were stuck near ~4.06M (a multi-decade low), but December 2025 improved as rates eased into the low-6% range.
• NAR’s Lawrence Yun forecasted a ~14% rise in 2026 resale home sales if rates ease and more inventory comes online.

Mortgage Rates Do Affect Affordability

Even a move from ~6.3% to ~5.9% helps monthly payments, but affordability is still constrained by:

• high price levels
• limited listings (months’ supply remains low)
• high property taxes

US homebuyers might need to be more assertive in pushing government and the FED to lower interest rates.  President Trump’s executive orders can encourage this, but it’s a drop in the bucket.

As you saw in the Ychart, the 10 year treasury yield is the big issue for banks and lenders. Their wall of worry is keeping them ultra cautious and slightly happy about the FED’s intent with continuous high rates.

It will be another challenging year for homebuyers to buy new or resale homes, and for cost pressured homeowners to refinance their existing mortgage.

If you must refinance this year, begin your mortgage shopping experience online.

See more on the 2026 housing market update along with a view of the US housing market as it exists.