As the U.S. housing market heads into 2026, mortgage rates are projected to decline slightly but remain high enough to keep affordability a challenge for many prospective buyers. Following a volatile few years marked by steep hikes and small drops, current projections indicate that 30-year fixed mortgage rates will hover just above 6 percent, easing only marginally compared to recent years.
According to Freddie Mac, average mortgage rates dropped to around 6.22 percent by December 2025, down from a peak of 7.79 percent in October 2023, but still significantly above the sub-3 percent levels seen during the pandemic. This continued pressure on affordability has shaped expectations for what lies ahead.
Rates Likely to Stay Above 6% as Market Finds Stability
After years of sharp swings, mortgage rates in 2026 are expected to remain relatively stable. According to Realtor.com’s 2026 Housing Forecast, the average 30-year fixed mortgage rate is projected to hold at 6.3 percent for the year. This would represent a small decrease from the 6.6 percent average in 2025, reflecting a modest improvement in borrowing conditions.
Despite this, housing analysts caution that rates will not return to pre-2022 lows. According to Newsweek, Bankrate’s Jeff Ostrowski stated that mortgage rates will likely “stay just above 6 percent over the next year,” with little on the horizon to shift them dramatically. The Federal Reserve’s monetary policy plays an indirect but influential role in shaping rate movements, and while further cuts are anticipated, the effect may be limited. LendingTree’s Matt Schulz predicted no more than two rate cuts in 2026 and noted that “these potential cuts will not move the needle much.”
Investor sentiment, inflation trends, and Treasury yields continue to weigh heavily on rate outcomes. According to the Bureau of Labor Statistics, inflation is expected to remain close to 3 percent, while unemployment will edge just above 4 percent, creating a relatively steady economic backdrop with low likelihood of major interest rate swings.
Housing Affordability to Improve Slightly, But Challenges Persist
While interest rates may stabilize, other factors shaping the housing market will continue to make affordability a central issue. According to Realtor.com, home prices are projected to rise modestly by 2.2 percent in 2026. This nominal growth, when adjusted for inflation, may actually lead to a slight drop in real home prices, offering a narrow opening for affordability improvements.
Alongside rate stabilization, income growth is expected to outpace inflation, with the typical mortgage payment declining by 1.3 percent year over year. As a result, the share of income spent on a median home purchase is expected to fall below 30 percent for the first time since 2022. This suggests that while homes will still be expensive, the average buyer’s financial burden may ease somewhat.
Inventory recovery will also play a part. The number of homes for sale is forecast to increase by 8.9 percent in 2026, which could give buyers more negotiating power. According to the same source, the market will likely lean toward balance, with supply gradually catching up to demand.
Yet affordability concerns are not disappearing. As Newsweek reported, many potential buyers remain sidelined due to high prices and elevated mortgage rates, and any economic slowdown could worsen their prospects. Redfin’s Daryl Fairweather noted that rates may briefly dip below 6 percent in 2026, but “not enough to restore pandemic-era affordability.”
