Will Interest Rates Go Down in January? | Predictions 2026

Mortgage rate forecast for next week (Dec. 22-26)

Mortgage rates barely budged from last week but did come down a little.

The average 30-year fixed rate mortgage (FRM) decreased to 6.21% on Dec. 18 from 6.22% on Dec. 11, according to Freddie Mac. The last time the average 30-year FRM went above 7% was Jan. 16, 2025.

“The average 30-year fixed-rate mortgage has remained within a narrow 10-basis point range over the last two months. With rates down half a percent over last year, purchase applications are 10% above the same time one year ago,” said Sam Khater, chief economist at Freddie Mac.

The latest borrowing activity

Though lagging, the most recent weekly mortgage application report from the Mortgage Bankers Association showed a seasonally adjusted 3.8% decrease for the seven days ending Dec. 12. The refinance index declined 4% week-over-week while surging 86% from a year ago, while the purchase index dipped 7% weekly and grew 13% annually.

“Purchase application volume typically drops off quickly at the end of the year, and this shifts the mix of the business, with the refinance share reaching 59% last week, the highest level since September. However, refinance activity has remained mostly the same for the past month as rates continue to hold at around the same narrow range,” said Mikae Fratantoni, chief economist at the MBA.

In this article (Skip to...)

• Will rates go down in January?
• 90-day forecast
• Expert rate predictions
• Mortgage rate trends
• Rates by loan type
• Mortgage strategies for January
• Mortgage rates FAQ

Will mortgage rates go down in January?

“Neither the Federal Reserve cutting rates in December nor disappointing jobs numbers resulted in rates declining further, although the usual seasonal slowdown in home buying activity may prompt slightly lower mortgage rates during January and February.“

-Rick Sharga, CEO at CJ Patrick Company

Mortgage rates fluctuated significantly in 2023, with the average 30-year fixed rate going as low as 6.09% and as high as 7.79%, according to Freddie Mac. That range narrowed from 6.08% to 7.22% in 2024, and narrowed further in 2025 between 6.17% and 7.04%.

We may have already seen the peak of this rate cycle. But if inflation rises, mortgage rates could uptrend. Many factors drive interest rates, which makes them subject to volatility and could change direction any given week.

Experts from First American, Realtor.com, and CJ Patrick weigh in on whether 30-year mortgage rates will climb, fall, or level off in January.

Expert mortgage rate predictions for January

Danielle Hale, chief economist at Realtor.com

Prediction: Rates will moderate

In January, I expect mortgage rates to be relatively stable. They’ve hovered roughly around 6.25% since mid-September, and that’s largely where I expect them to remain in both the near-term and medium term. Realtor.com’s 2026 Housing Forecast anticipates that we’ll end the year at roughly this same level. Mortgage rates could be pushed higher (if inflation is too high or data show a healthier labor market) or lower (if inflation comes in lower than expected or the labor market is softer). We’re about to see a deluge of government data as we make up for the drought we saw during the federal government shutdown.

“I expect the net impact of all of this data will be very small for mortgage rates. That’s not to say that the data is not important—it is essential!—but in this case, the economic picture appears to be evolving slowly enough that not much will likely have changed, at least if the latest jobs report is any indication. For homebuyers and sellers, roughly stable mortgage rates enable budget planning that has been challenging to do in the last few years when rates have shifted more substantially in short periods of time. This should help more homebuyers get to the closing table in the year ahead, and is a factor in my expectation that home sales will be modestly higher in 2026.”

Rick Sharga, CEO at CJ Patrick Company

Prediction: Rates will moderate

Mortgage rates are likely to start 2026 the way they ended 2025 - stuck in a narrow range between 6.25-6.50% for 30-year loans and 5.50-5.75% for 15-year mortgages. Neither the Federal Reserve cutting rates in December nor disappointing jobs numbers resulted in rates declining further, although the usual seasonal slowdown in home buying activity may prompt slightly lower mortgage rates during January and February. Longer-term, the spread between mortgage rates and yields on 10-year treasuries seems to be narrowing, and moving back towards historical averages. If this continues, there’s a chance we could see mortgage rates drop by 50 basis points or more.

Sam Williamson, senior economist at First American

Prediction: Rates will moderate

“Mortgage rates are likely to stay in the low-6% range in January as the Federal Reserve continues its cautious pivot toward a more neutral policy stance. After several cuts late in 2025, officials appear inclined to pause and evaluate how those moves are filtering through the economy. Rates could drift lower if incoming data—especially the December jobs report—signals cooling momentum and bolsters expectations for additional easing in 2026. Conversely, firmer inflation or signs of labor-market resilience would raise the hurdle for near-term easing, likely keeping mortgage rates anchored near current levels.”

Mortgage interest rates forecast next 90 days

As inflation ran rampant in 2022, the Federal Reserve took action to bring it down and that led to the average 30-year fixed-rate mortgage spiking in 2023.

When inflation gradually cooled in 2024, the Fed made three rate cuts (September, November, and December). As uncertainty and chaos defined 2025, the central bank held the federal funds rate range steady at its first five meetings. However, continued instability and weakened job markets gave the Federal Reserve Open Market Committee enough justification to finish the year with cuts in September, October, and December.

Of course, rates could rise or fall on any given week due to many factors or if another global event causes widespread uncertainty in the economy.

Mortgage rate predictions for 2026

The 30-year fixed-rate mortgage averaged 6.21% as of Dec. 18, according to Freddie Mac. Four of the five major housing authorities we looked at predict 2026’s opening quarter average to finish below that.

National Association of Realtors sits at the low end of the group, projecting the average 30-year fixed interest rate to settle at 6%. Meanwhile, the Mortgage Bankers Association had the highest Q1 forecast of 6.4%.

Current mortgage interest rate trends

Mortgage rates decreased slightly from last week, adhering to a narrow 17-basis-point range over the fourth quarter.

The average 30-year fixed rate dipped to 6.21% on Dec. 18 from 6.22% on Dec. 11. The average 15-year fixed mortgage rate fell to 5.47% from 5.54%.

Source: Freddie Mac

After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 23-year high in 2023 before descending over 2024 and 2025. Many experts and industry authorities believe they will follow a downward trajectory in 2026. Whatever happens, interest rates are still below historical averages.

Dating back to April 1971, the fixed 30-year interest rate averaged around 7.8%, according to Freddie Mac. So if you haven’t locked a rate yet, don’t lose too much sleep over it. You can still get a good deal, historically speaking — especially if you’re a borrower with strong credit.

Just make sure you shop around to find the best lender and lowest rate for your unique situation.

Mortgage rate trends by loan type

Many mortgage shoppers don’t realize there are different types of rates in today’s mortgage market. But this knowledge can help home buyers and refinancing households find the best value for their situation.

Which mortgage loan is best?

The best mortgage for you depends on your financial situation and your goals.

For instance, if you want to buy a high-priced home and you have great credit, a jumbo loan is your best bet. Jumbo mortgages allow loan amounts above conforming loan limits, which max out at $ in most parts of the U.S.

On the other hand, if you’re a veteran or service member, a VA loan is almost always the right choice. VA loans are backed by the U.S. Department of Veterans Affairs. They provide ultra-low rates and never charge private mortgage insurance (PMI). But you need an eligible service history to qualify.

Conforming loans and FHA loans (those backed by the Federal Housing Administration) are great low-down-payment options.

Conforming loans allow as little as 3% down with FICO scores starting at 620. FHA loans are even more lenient about credit; home buyers can often qualify with a score of 580 or higher, and a less-than-perfect credit history might not disqualify you.

Finally, consider a USDA loan if you want to buy or refinance real estate in a rural area. USDA loans have below-market rates — similar to VA — and reduced mortgage insurance costs. The catch? You need to live in a ‘rural’ area and have moderate or low income to be USDA-eligible.

Mortgage rate strategies for January 2026

Mortgage rates displayed their famous volatility throughout 2024 before 2025’s gradual downward trajectory. The Federal Reserve’s three-straight rate cuts, with the potential for more in the near future, provide optimism for modestly descending rates in 2026.

However, the Trump Administration’s wealth consolidation and unstable inflation caused the Fed to pause in January, March, May, June, and July. As always, the committee said it would adjust its policies as necessary — which could mean additional cuts, none at all or even possible raises.

Here are just a few strategies to keep in mind if you’re mortgage shopping in the coming months.

Be ready to move quickly

Indecision can lead to failure or missed opportunities. That holds true in home buying as well.

Although the housing market is becoming more balanced than the recent past, it still favors sellers. Prospective borrowers should take the lessons learned from the last few years and apply them now even though conditions are less extreme.

“Taking too long to decide to make an offer can lead to paying more for the home at best and at worst to losing out on it entirely. Buyers should get pre-approved (not pre-qualified) for their mortgage, so that the seller has some certainty about the deal closing. And be ready to close quickly — a long escrow period will put you at a disadvantage.

“And it’s definitely not a bad idea to work with a real estate agent who has access to “coming soon” properties, which can give a buyer a little bit of a head start competing for the limited number of homes available,” said Rick Sharga.

If mortgage rates continue on a downward trajectory, more and more buyers will likely enter the market after being priced out on the sidelines. Being decisive (and prepared) should only play to your advantage.

Shopping around isn’t only for the holidays

Since interest rates can vary drastically from day to day and from lender to lender, failing to shop around likely leads to money lost.

Lenders charge different rates for different levels of credit scores. And while there are ways to negotiate a lower mortgage rate, the easiest is to get multiple quotes from multiple lenders and leverage them against each other.

“For potential home buyers, it’s important to get quotes from multiple lenders for a mortgage, as rates can vary dramatically, especially during such a volatile period,” said Odeta Kushi.

As the mortgage market slows due to lessened demand, lenders will be more eager for business. While missing out on the rock-bottom rates of 2020 and 2021 may sting, there’s always a way to use the market to your advantage.

How to shop for interest rates

Rate shopping doesn’t just mean looking at the lowest rates advertised online because those aren’t available to everyone. Typically, those are offered to borrowers with great credit who can put a down payment of 20% or more.

The rate lenders actually offer depends on:

• Your credit score and credit history
• Your personal finances
• Your down payment (if buying a home)
• Your home equity (if refinancing)
• Your loan-to-value ratio (LTV)
• Your debt-to-income ratio (DTI)

To figure out what rate a lender can offer you based on those factors, you have to fill out a loan application. Lenders will check your credit and verify your income and debts, then give you a ‘real’ rate quote based on your financial situation.

You should get three to five of these quotes at a minimum, then compare them to find the best offer. Look for the lowest rate, but also pay attention to your annual percentage rate (APR), estimated closing costs, and ‘discount points’ — extra fees charged upfront to lower your rate.

This might sound like a lot of work. But you can shop for mortgage rates in under a day if you put your mind to it. And shaving just a few basis points off your rate can save you thousands.

Mortgage interest rate FAQ

What are today’s mortgage rates?

Mortgage rates are rising, but borrowers can almost always find a better deal by shopping around. Connect with a mortgage lender to find out exactly what rate you qualify for.

¹Today's mortgage rates are based on a daily survey of select lending partners of The Mortgage Reports. Interest rates shown here assume a credit score of 740. See our full loan assumptions here.

Selected sources:

• https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
• http://www.freddiemac.com/research/datasets/refinance-stats/index.page