Homebuyers are entering 2026 with optimism, but is it deserved?
A new study by Clever Real Estate and Best Interest Financial found that about 42% of those planning to buy in the coming year expect mortgage rates to fall below 5%, making it possible for them to enter the housing market. However, forecasts and expert analysis indicate the change will be far more subtle, leaving these buyers at risk of potential disappointment.
With 30-year mortgage rates set to move very little this year, if at all, buyers may end up staying on the sidelines, as the survey found most would-be homebuyers surveyed say they’ll only accept rates under 6 percent. Current homeowners with low locked-in rates may also remain reluctant to sell.
Experts say, though, that buyer expectations about mortgage rates are likely off the mark due to misconceptions about how rates are set. Moreover, the survey shows that many consumers consider ultra-low rates following the COVID-19 pandemic the norm rather than the exception. Setting the record straight will be key to getting more homes on the market — and more buyers into them.
Homebuyer Expectations vs. The Data
Consumer predictions about mortgage rates are mixed: 43% expect rates to stay between 5% and 7%, which aligns with expert forecasts. Nearly as many people predict rates will fall below 5%, while 16% believe rates will spike to 7% or higher.
“The average homebuyer feels they have a fairly good understanding of mortgage rates; however, their understanding is often flawed,” said Elena Novak, who leads real estate research and analysis at PropertyChecker.com.
Accurately predicting where mortgage rates will land this year is nearly impossible, as they could take several different paths. Furthermore, any prior predictions could be upended if Kevin Warsh, the nominee for Federal Reserve Chairman, is confirmed.
Warsh often talks about cutting interest rates, which could help lower mortgage rates. However, several other factors suggest little movement in rates this year.
“If economic activity slows significantly and unemployment rises, mortgage rates could drop further,” said Selma Hepp, chief economist at Cotality, a mortgage data analytics firm. “In addition, the Federal Reserve’s response and the new appointees’ approach to evolving economic conditions could affect the rate path.”
Busting Buyer Misconceptions: How Are Rates Actually Determined?
Clever’s survey shows that most consumers don’t understand how mortgage rates are set. Their blame for high rates is also varied: 29% attribute it to inflation, and 27% to the Trump administration’s policies. Approximately 9% say the Federal Reserve is responsible.
“Everyone thinks when the Federal Reserve lowers rates, mortgage rates will also come down,” said Jonathan Maula, owner and chief investment officer of Castle Hill Capital. “It’s tough to point a finger at anyone in particular.”
The data most closely linked to the 30-year mortgage rate includes inflation, the unemployment rate, and the 10-year U.S. Treasury note yield. The Fed’s preferred inflation gauge is the Personal Consumption Expenditures (PCE) price index, which indicates that inflation is 2.8%. Having spent much of 2025 in the 2.6% to 2.7% range, the PCE suggests little movement for mortgage interest rates this year.
Additionally, rates typically fall when unemployment is high. At the end of 2025, the unemployment rate was 4.4%, up slightly from 4.1% year over year. Such a small difference is unlikely to move mortgage rates too much.
The 10-year Treasury note yield typically moves in sync with mortgage rates and is often the best indicator of where rates are headed. Treasury yields would need to fall below 4% in the coming months to pull the mortgage rate below 6%.
“The market is driven by supply and demand, and there are many factors that can impact the 10-year Treasury,” Maula said.
Rates Are Considered Moderate Historically, but Where You Live Matters
Experts say it’s important for potential homebuyers to understand that the COVID-era mortgage rates of 3% or less were anomalies, not the norm. Over the last 20 years, rates were typically in the 7%–9% range, peaking at 18.6% in 1981.
The current rate of 6.1% is close to the lowest point we’ve seen in the last three years, Novak said. It’s down significantly from the nearly 7% rates of a year ago.
“The current mortgage rates are higher than the extremely low pandemic rates; however, the current rates are below the long-term average, and they sit in a middle range compared with decades of mortgage rate data,” she said.
Today’s median home price-to-income ratio is 4.9, indicating that it would take nearly 5 years of income to purchase a home. Nineteen states have home price-to-income ratios at or above this number, indicating lower affordability. Hawaii has the highest at 8.8.
“Because prices in these areas are significantly higher than the average household income, lower rates can have various side effects that actually worsen affordability for many local buyers,” Novak said.
Even if mortgage rates decline, homeowners with low rates are likely to remain in their homes, she explained. This keeps the number of available homes low and intensifies competition, making it more difficult for low-income buyers or those who may need to buy a new house before selling their current one.
Worst-Case Scenario: What If Rates Increase?
Experts say there’s no reason to expect rates to rise in 2026 unless the U.S. experiences some sort of significant economic disruption. However, if another pandemic or financial crisis occurs, buying a home will become more expensive for most people.
“Mortgage rate increases in 2026 would dramatically reduce homebuying,” said Kristina Morales, founder and CEO of Loanfully. “Real wages have declined, and the increased cost of living combined with higher mortgage rates would be a significant barrier to new buyers in the real estate market.”
Current homeowners with low rates would be even less inclined to sell, further stretching an already tight housing market. That is, unless they also see their incomes cut or vanish altogether, leaving them unable to afford their houses.
The lesson, experts say, is to put down the crystal ball and focus on affordability. Trying to predict where rates will land — and holding out for a substantial drop — will only delay homeownership.
“You know what you can and cannot afford,” Maula said. “Do not place yourself in a house with a huge bet on rates coming down quickly and being able to refinance to save money. Stay within your budget and play the cards that are currently dealt.”