Savings Alert: Experts Predict This Will Be the Lowest Mortgage Rate of the Year. Find Out When to Lock Yours In
Like death and taxes, mortgage-rate fluctuations are a certainty of life. From year to year, and even within a calendar year, rates fluctuate so much that it can be challenging to figure out the best time to buy a house. If you bought a home five years ago, you may have benefited from the Federal Reserve’s efforts to stimulate the slumping economy amid the COVID-19 pandemic. Mortgage rates plummeted to record lows, and by the end of 2020, the rate was 2.65%.
But over the next three years, rates crept back up—to a high of 7.79% in October 2023, a rate we hadn’t seen since 2000. Combine that with astronomically high house prices, and homeownership felt out of reach for Americans. Inflation went up. Rents skyrocketed.
Fast-forward to 2026. Even if rates aren’t at historic levels, they’re still too high for many people to afford a home. So when can would-be home buyers expect mortgage rates to drop?
A new report by LendingTree predicts that this year will finally bring interest-rate relief. How low will they go? We talked to Matt Schulz, chief consumer finance analyst at LendingTree, to bring you all the details, including when you can see those lower rates. Whether you’re financial flexing like Gen Z or downsizing so you can afford to retire, mortgage rates matter to your bottom line. Keep reading to see what 2026 has in store.
Get Reader’s Digest’s Read Up newsletter for more money, humor, travel, tech and fun facts all week long.
Why are mortgage rates an important consideration when you’re buying a home?
Mortgage rates are important because they impact your monthly payment. Even the difference of a single percentage point might shock you.
Using LendingTree’s mortgage calculator, we determined the monthly payment for two theoretical homes costing $400,000 and $300,000. The numbers are based on a 30-year term with a 20% down payment and include average property tax and homeowner’s insurance costs. (It’s important to note that taxes, insurance and overall affordability vary significantly by location.)
- If you buy a $300,000 home at a 6% mortgage rate, your monthly payment will be approximately $1,839. At a 7% mortgage rate, that payment goes up to $1,997.
- If you buy a $400,000 home at a 6% mortgage rate, your monthly payment will be approximately $2,452. At a 7% mortgage rate, that payment goes up to $2,662.
How do interest rates fluctuate from year to year?
Here is the yearly rate breakdown of 30-year, fixed-rate mortgages over the past six years, including the differences between the highest and lowest weekly average annual percentage rates (APR), courtesy of LendingTree, using FreddieMac data.
- 2025: 7.04% (highest) – 6.15% (lowest) = 0.89 points (difference)
- 2024: 7.22% (highest) – 6.08% (lowest) = 1.14 points (difference)
- 2023: 7.79% (highest) – 6.09% (lowest) = 1.70 points (difference)
- 2022: 7.08% (highest) – 3.22% (lowest) = 3.86 points (difference)
- 2021: 3.18% (highest) – 2.65% (lowest) = 0.53 points (difference)
- 2020: 3.72% (highest) – 2.66% (lowest) = 1.06 points (difference)
And though 2022 is an outlier, this kind of fluctuation is common. “Since 2000, the gap between the year’s highest and lowest weekly average APRs has never been lower than a half-point,” Schulz said in a press release.
How do interest rates fluctuate from the first week to the last week of the year?
Not only do interest rates change year to year, but they also fluctuate within the calendar year. From January to December, rates move up and down, though Shultz says in the LendingTree report that the gap between the year’s first and last weekly averages “tends to be significantly smaller than the one between the yearly high and low.” (It’s been a quarter-point or less 10 times since 2000, according to LendingTree.)
There are outliers, like 2022, when the Federal Reserve raised rates seven times. That year, the difference between the first and last weeks was close to four points.
How low are mortgage rates expected to drop in 2026?
Shultz expects mortgage rates to dip under 6% in 2026, and you could see that lower rate early in the year. (As of Jan. 9, 2026, Bankrate, the personal finance website, puts the average rate at 6.16%.)
“I think we may see rates drop just below 6% in the first quarter of 2026, though I don’t think they’ll stay there,” Schulz said in an interview. “What seems more likely to me is rates may dip below and rise above 6% a few times this year.”
What other predictions are experts making about the 2026 home-buying market?
In addition to mortgage rates hovering around 6%, Schulz has two additional predictions about the 2026 home-buying market.
There will be an increase in refinancing
Homeowners who are locked in at the super-low, post-pandemic rates are unlikely to give them up, but people paying mortgages with interest rates over 7% will probably look to refinance when rates dip below 6%. “When it first happens, we could see a significant number of people choose to refinance their high-interest mortgages,” Schulz says.
We won’t see alternative mortgages anytime soon
You may have heard about President Trump’s suggestion to ignite the lagging housing market with 50-year mortgages. Longer mortgages reduce monthly payments, but experts say buyers would pay way more interest over the life of the loan, and building home equity would be slow. The idea didn’t take off.
Another alternative to traditional mortgage structures is the idea of the portable mortgage, which means that you can take your current mortgage rate with you if you move and buy another house. This would allow homeowners with a low rate to move when they want to instead of waiting for rates to drop.
“We won’t see portable or 50-year mortgages as an option in 2026,” Schulz says. “Even if they become a reality here eventually, it’ll likely take years, and that certainly doesn’t help struggling homeowners today.”
So what will help? Keeping an eye on mortgage rates. If Schultz is right, you’ll see them hit below 6%, giving you a good opportunity to refinance or lock in a lower rate on a new home.
RELATED:
- These Are the 10 U.S. Cities Where a $100,000 Salary Goes the Furthest
- Ouch! New Study Reveals the Top 10 Cities Where Residents Are Hardest Hit by Inflation
- This One Common Habit Could Be Depleting Your Retirement Savings—Just Before You Really Need the Cash
About the expert
|
Why trust us
At Reader’s Digest, we’re committed to producing high-quality content by writers with expertise and experience in their field in consultation with relevant, qualified experts. We rely on reputable primary sources, including government and professional organizations and academic institutions as well as our writers’ personal experiences where appropriate. We verify all facts and data, back them with credible sourcing and revisit them over time to ensure they remain accurate and up to date. Read more about our team, our contributors and our editorial policies.
Sources:
- Matt Schulz, chief consumer finance analyst at LendingTree and author of Ask Questions, Save Money, Make More: How to Take Control of Your Financial Life; email interview, January 2026
- LendingTree: “From Rate Cuts to Rising Debt: What 2026 Will Look Like for Your Wallet”
- Federal Reserve: “30-Year Fixed Rate Mortgage Average in the United States”
- LendingTree: “Mortgage Calculator”
- Federal Reserve Bank of New York: “Household Debt and Credit Report (Q3 2025)”
- Bankrate: “30-year mortgage rates decrease – When should you lock? | Today’s mortgage and refinance rates, January 9, 2026”
The post Savings Alert: Experts Predict <i>This</i> Will Be the Lowest Mortgage Rate of the Year. Find Out When to Lock Yours In appeared first on Reader's Digest.
from Reader's Digest https://ift.tt/8RMg2P1
Comments
Post a Comment