The national average 30-year fixed mortgage rate has increased 0.08% to 6.46%, according to the latest data from Freddie Mac.
Only a month ago, the 30-year rate was just 6%. In fact, it had dropped below 6% to 5.98% the week prior. Now, it’s nearing 6.5%.
In my years of reporting on mortgage rates, I’ve witnessed rates plummet at the beginning of the Covid pandemic, rise as the Federal Reserve hiked the fed funds rate, and gradually decline over the last year. Now, I’ve seen interest rates bounce back up in response to the conflict in Iran.
As the turmoil in the Middle East continues, is a mortgage rate decrease in the cards for 2026?
I talked with experts at three national mortgage lenders — loanDepot, Bank of America, and Better Mortgage — and each gave their perspectives on what it would take to drive mortgage rates back down near 6% this year.
A struggling economy leads to lower mortgage rates
Mortgage rates have been rising since the U.S. and Israel attacked Iran at the end of February. This international conflict and oil prices have been dictating interest rates more than the usual economic factors experts watch, such as inflation and jobs reports.
The economy may be starting to play a bigger role again, though.
“After a stretch where the market was almost entirely focused on the conflict in the Middle East and the price of oil, we’re starting to see some attention shift back toward the economic data that took a back seat,” said Jeff DerGurahian, chief investment officer and head economist at loanDepot.
Related: Redfin reveals change in home sales, housing market
“Mortgage rates are still elevated… but investors are no longer looking at oil in isolation,” he continued. “Instead, they’re starting to consider whether a softer economy could keep energy-driven inflation from becoming a more persistent problem.”
He noted that if the economy softens, it could cancel out the impact higher oil prices have on mortgage rates.
What does a “softer economy” look like? Inflation would need to grow more slowly, and — unfortunately for many Americans — there would be fewer jobs.
In some ways, what’s good for the economy is also good for mortgage rates. For example, when inflation slows down, rates tend to decrease in response. Slower inflation occasionally encourages the Fed to cut the federal funds rate, which also benefits home loan rates.
But in general, mortgage rates increase when the economy is strong and decrease when it struggles.
Why? Because if Americans have stable employment and more money, then they’re more likely to be able to afford a house. This creates more competition, which drives up mortgage rates (and usually home prices).
DerGurahian said that Friday’s Employment Situation Summary from the U.S. Bureau of Labor Statistics will be a crucial indicator of where the economy and rates are headed.
“A weak jobs number could bring more attention back to the underlying softness in the economy and help improve the outlook for rates…. A stronger reading, on the other hand, could reinforce the idea that borrowing costs may stay elevated for longer,” he said.
Expect mortgage rate decreases to be gradual
Unfortunately, one month of encouraging inflation data or one weak jobs report won’t send mortgage rates plummeting back to 6% right away. Rates may tick down here and there, but any noteworthy decreases will be gradual.
First, the Federal Reserve wants to see ongoing economic improvement before cutting the fed funds rate. Second, the Fed isn’t the only factor that impacts home loan rates.
“A sustained period of economic stability, responsible fiscal policy, and lower inflation would do far more to bring rates down than rate cuts alone,” Matt Vernon, head of Consumer Lending at Bank of America, told TheStreet.
More on mortgages and mortgage rates:
- Fannie Mae’s crypto-backed mortgage move has surprising benefits
- Suze Orman shares wealth-building strategy for homeowners
- How Fed meeting impacts mortgage rates, housing market
Vernon said that for mortgage rates to drop closer to 6%, the 10-year Treasury yield, which mortgage rates follow more closely than the fed funds rate, would need to decrease significantly.
DerGurahian also noted that even if the 10-year Treasury drops, mortgage rates might not fall as quickly. They may need more time to catch up.
“Bringing mortgage rates meaningfully back toward 6% is unlikely to happen overnight,” DerGurahian said. “It will likely take more than one report, along with some easing in the Middle East, before we see a more durable move lower.”
Buyers may need to take mortgage rates into their own hands
“There’s no need to wait passively for the Fed to get mortgage rates back toward 6%,” Vishal Garg, founder and CEO of Better Mortgage, told TheStreet.
Homebuyers should apply for preapproval with three or four mortgage lenders to compare their interest rates and fees. A study by Freddie Mac revealed that buyers could have saved up to $600 per year on their loan had they gotten rate quotes from two lenders. People who received at four quotes or more could have saved at least $1,200 yearly.
Comparing lenders helps you see more than just which offers the lowest rates and fees. You’ll also find out which provide a type of loan that charges a lower rate (e.g., an FHA loan), have temporary rate buydown programs, or offer down payment assistance programs.
Finding a lender that makes homeownership more affordable is key.
“Combine that with a more normal inflation backdrop and a modest easing cycle from the Fed, and you have a clear, actionable path to 6% mortgages that comes from… productivity, instead of wishful thinking,” Garg said.
Related: Fannie Mae predicts shifts in mortgage rates, housing market
#Mortgage #rate #experts #drop #blunt #message