The Federal Reserve made a significant move by cutting its key interest rate by a quarter point (25 basis points) at the December FOMC meeting, bringing the overnight borrowing rate to the 3.5%-3.75% range.
Experts were consulted to gather their insights on what might happen to mortgage rates in the upcoming year. While interest rate decisions are often seen as the main driver of mortgage rates, other factors such as market conditions, tariffs, overall inflation, stagnant wages, and more play a crucial role in shaping the mortgage rate landscape.
Financial experts weighed in on their predictions for mortgage rates in 2026 following the Fed’s three rate cuts in 2025. The post-meeting news conference saw Fed chair Jerome Powell stating that they are closely monitoring the evolving economy. However, three members dissented from the rate decision, a rare occurrence that hasn’t happened since September 2019.
Despite the rate cut, the Mortgage Bankers Association reported a 3.8% decrease in total mortgage application volume for the week ending December 12. Mike Fratantoni, MBA’s SVP and Chief Economist, noted that mortgage rates edged up following the FOMC meeting, signaling a possible end to the rate-cutting cycle.
Real estate expert Ralph DiBugnara expressed skepticism about significant rate cuts in 2026, citing the minimal rate cut at the December meeting that lacked unanimous support within the Fed. He emphasized the need for Chairman Powell to take a more aggressive stance on lowering interest rates to address affordability concerns.
Looking at recent data from Fortune, mortgage rates remained relatively stable as of December 19, with a small decrease in the average interest rate for a 30-year fixed-rate conventional loan.
Moving forward to 2026, experts like Jeffrey M. Ruben from WSFS Bank anticipate that mortgage rates will remain higher than desired but not drastically different from historical norms. Ruben highlighted the complex interplay of factors like inflation, trade policy uncertainty, and wage growth that are keeping mortgage rates elevated.
Michael Merritt from BOK Financial expressed cautious optimism for rate relief in 2026, with most models predicting a gradual decrease in rates to levels between 5.9% and 6.1%. Lower rates could potentially unlock affordability for millions of borrowers and drive increased refinancing activity.
Darren Tooley, a senior loan officer at Cornerstone Financial Services, echoed the sentiment of a modest rate drop in 2026, emphasizing the importance of monitoring key economic factors like job creation, wage growth, and inflation trends to anticipate rate movements.
While experts anticipate a downward trend in mortgage rates, they caution that rates don’t move linearly and may experience fluctuations throughout the year. It’s essential to remain vigilant and adapt to changing economic conditions to make informed decisions about mortgages and refinancing.
In conclusion, the mortgage rate landscape in 2026 is expected to see a gradual decline, bringing rates closer to historical averages. By staying informed and monitoring economic indicators, borrowers can plan effectively for their mortgage needs in the upcoming year.
