Mortgage Rates Forecast For 2026: Experts Predict Whether Rates Will Keep Dropping
Mortgage rates spent much of 2025 parked in the upper-6% range, held in place by persistent inflation pressures and a cautious Federal Reserve. That began to shift late in the year as the Fed signaled it was ready to ease policy. Rates slipped ahead of the September 2025 rate cut, the first of the year, and then drifted lower again before the October meeting and continued their gradual decline as markets anticipated further action.
The Fed delivered its third consecutive rate cut in December 2025, bringing the federal funds rate down to a range of 3.50% to 3.75%. But at its January 2026 meeting, the central bank hit pause, holding rates steady as policymakers assess how previous cuts are working their way through the economy.
Mortgage rates have continued their downward trend despite the Fed’s pause, with the average 30-year fixed mortgage rate now sitting at 6.18% (as of January 29), down from the mid-6% range just months ago. But with the Fed taking a breather on rate cuts, will mortgage rates see additional downward pressure?
On January 28, 2026, the Federal Open Market Committee (FOMC) of the Federal Reserve voted to maintain its benchmark federal funds rate at a range of 3.50% to 3.75%. This decision broke a streak of three consecutive rate reductions following earlier cuts in September, October and December of 2025.
The decision wasn’t unanimous. Federal Reserve governors Stephen Miran and Christopher Waller both voted in favor of cutting rates by an additional 25 basis points, marking their dissent from the majority. This signals some disagreement within the Fed about whether the economy needs further support, though it didn’t change the outcome.
The federal funds rate, which is the overnight borrowing rate for banks, indirectly influences borrowing costs throughout the economy, including on mortgages and other loans. The Fed’s decision to pause reflects a more cautious stance as officials weigh competing economic signals heading into 2026.
Will the Fed Keep Cutting Rates?
Looking ahead, whether the Fed will continue easing remains uncertain. Fed Chair Jerome Powell struck an optimistic tone at the January press conference, noting that the economy “expanded at a solid pace last year and is coming into 2026 on a firm footing.” He emphasized that officials are “well positioned” to evaluate incoming data meeting by meeting before making further policy adjustments.
The central bank upgraded its assessment of economic growth in the January statement, citing solid economic activity. The unemployment rate has shown signs of stabilization, though job gains have remained low. The challenge? Inflation remains “somewhat elevated” at 2.7% as of December, still above the Fed’s 2% target.
Officials have emphasized that future rate decisions will be data-dependent, taking into account economic growth, labor market conditions and inflation trends. At the December meeting, officials projected just one interest rate cut in 2026, suggesting a much more gradual pace of easing than markets initially anticipated.