Featuring the perspectives of:
Shant Banosian
President, Rate
David Battany
Executive Vice President of Capital Markets, Guild Mortgage
Eric Mager
National Director of Secondary, Movement Mortgage
Jeff Tucker
Principal Economist, Windermere
What do you expect to see in the mortgage rate environment in 2026, and how might policy or Fed decisions shape consumer borrowing power?
Shant Banosian: Heading into 2026, I expect mortgage rates to stabilize in the high-5% to low-6% range as the Fed transitions from a restrictive stance to a more neutral one. Inflation has cooled, but the job market is flashing warning signings, so the Fed will remain cautious and data dependent, wanting to ensure long-term stability before aggressively cutting rates.
The real opportunity lies in spread compression, which could improve borrowing costs even if the Fed moves slowly. For consumers, that means a noticeable increase in buying power, and for lenders, an opening to re-engage both new and existing clients. The key is being ready to move fast when economic data shifts.
David Battany: Mortgage rates will likely be flat to just slightly lower in 2026 compared to 2025. Many notable industry economic forecasters, including the Mortgage Bankers Association, are predicting rates will average 6.4% in 2026, effectively flat to their current market levels in December. Rate forecasts are always challenging to predict, and they are even more so for 2026, due to the recent government shutdown, which has deprived the bond markets of several months of key reports regarding the direction of the economy, the health of the labor market and the direction of inflation. These are the top three factors that will impact mortgage rates in 2026, with inflation likely being the most impactful of the three.
The Fed rate cut decisions only impact the rate for one-day loans made between banks who are members of the Federal Reserve system. Cuts to this rate normally push down short-term rates in the economy but have less impact on intermediate-term rates, such as those for five-year or seven-year ARM loans, and even less impact on 30-year fixed-rate mortgage loans. The Fed rate cuts do provide an immediate benefit for homeowners with HELOC loans, most of which are tied to the Prime index, which typically moves 1:1 in response to Fed rate cuts.
A key reason driving future Fed rate cuts would be if the Fed is comfortable that inflation rates are clearly trending down. Long-term inflation rates are a top enemy of long-term interest rates, such as the 30-year fixed rate mortgage. A drop in the expected rate of long-term inflation would lead to lower yields on long term Treasury bonds and also lower rates on mortgages securitized into the MBS bond market, which drives daily changes for most mortgage-rate sheets. A drop in 2026 mortgage rates would be more likely driven by a drop in expected future inflation rates, which is the same thing that would drive a Fed rate cut decision for one-day loans. The key point is that mortgage rates would drop because inflation is dropping, not just because the Fed also cut for the same reason.
Eric Mager: Mortgage rates have been steadily decreasing in the second half of 2025. The Fed is in a tough spot right now because they have two main competing goals: full employment and stable prices (low inflation). Inflation has stayed stubbornly above their 2% annual target, which would push them to keep rates a little higher. On the other hand, there have been a few signs of weakness in the job market, and this would nudge them to lower rates to support the economy. It’s a tug of war between those two objectives. One of the bright spots we’ve seen is true evidence of pent-up demand. Borrowers rushed in when rates dropped a bit this year, which was very telling for me. If rates make a bigger move down, you’ll see a massive influx of homebuyers.
Jeff Tucker: I expect mortgage rates to drift below 6.25% on typical 30-year fixed-rate mortgages, but there’s not much cause for hope that they’ll break far below 6%. The Fed has entered a rate-cutting cycle, but I think most of that is already priced into mortgage rates today. If the Fed cuts the federal funds rate a few more times, that will actually impact consumers most in other loan products, like credit card and auto loan rates.
Instead, the first factor I could see driving rates down closer to 6% is firmer data showing a slowdown in economic growth. Right now, lots of alternative data sources are pointing in that direction, but economists are largely flying blind from the government shutdown. The second factor gradually pushing mortgage rates lower is a shrinking spread: In a virtuous cycle for borrowers, the refinance risk of newly issued mortgages is shrinking, which makes lenders and investors demand less of a premium over 10-year Treasury yields. That process could deliver up to another half-point of mortgage rate reductions in the next two years.
Which loan products or financing structures do you believe will rise in popularity by 2026, and why?
Banosian: By 2026, affordability and creativity will drive product demand. Buydowns will continue leading the way, especially 2-1 and 1-0 structures, giving buyers early payment relief without hurting seller proceeds. We will also see growth in portfolio and [non-qualified mortgage] products such as [debt service coverage ratio], bank-statement and asset-depletion loans as more borrowers fall outside traditional income documentation. Second-lien and blended-rate options will help homeowners unlock equity without losing their low first mortgage. On the access side, down-payment assistance and multilingual lending platforms will expand reach to first-time and Spanish-speaking buyers.
Battany: Five-year and seven-year ARM loans will provide some 2026 homebuyers with more affordable monthly payments, but these will not be the ideal products for many first-time buyers who may not be able to absorb the payment shock that could occur as the rate on these ARMs could start increasing at the end of the five- or seven-year term.
Three percent down loans are permitted by Fannie Mae and Freddie Mac, despite a common misperception that homebuyers need a 20% down payment. This issue can be solved by increased homebuyer education efforts, to also include financial literacy and monthly budgeting education.
Down payment grants and soft seconds programs, typically provided by non-profits and via state and local housing finance agencies will continue to solve the down-payment challenges faced by many homebuyers.
Innovative mortgage products, such as shared appreciation mortgages and lease-purchase products can reduce a homebuyer’s monthly payments by up to 30-40% and will be a key part of how our industry addresses the affordability math problem in 2026.
Mager: The non-qualified mortgage market continues to grow. These are loans that don’t meet the CFPB guidelines for a Qualified Mortgage, but borrowers still have a demand for loans outside of those guidelines, and investors like the return on these products. 50-year mortgages made some headlines, but I personally don’t think it’s the right tool for the consumer.
Tucker: I think adjustable rate mortgages will continue to climb in popularity, though they’ll remain the minority of loans. The yield curve has steepened dramatically in the last year, which is making the upfront interest rates available on ARMs much more attractive. Because these products today still require careful underwriting and locking in the initial rate for several years, I’m not too worried about the risks of such products. They’re much safer than the adjustable-loan products of the early to mid-2000s.
How do you see the lender-Realtor relationship evolving in 2026 to better serve clients in a competitive market?
Banosian: The most successful lender-Realtor partnerships in 2026 will be data-driven, proactive and co-branded. Agents do not just need a loan officer; they need a business partner who brings tools, insights and solutions that help convert more buyers and move stale listings. That means providing instant buydown analyses, equity alerts, loyalty tracking and property marketing assets automatically and at scale. The traditional referral-for-referral model is being replaced by a shared growth model where both sides win when deals close faster and pipelines stay full. Technology will handle the automation, and human connection will handle the trust.
Battany: The relationship between mortgage lenders and Realtors will continue to become closer in 2026, as both will be striving to find the best solutions to the affordability challenges homebuyers will face. As innovative solutions are developed, the entire housing industry, led by Realtors and mortgage lenders, will need to adapt and learn new products and new solutions to succeed in solving these affordability challenges. Education and training will be key for Realtors, lenders and homebuyers on how to best utilize the innovations coming into the market in 2026.
Mager: There are a lot of cool technologies in the market that will help borrowers over the next decade, but I still feel that homebuyers want to lean on someone they can trust when they are buying a home. It’s a process that can cause a lot of anxiety. I’ve always said Realtors are half Realtor and half psychiatrist for their clients since it can be a stressful process for the homebuyer— the same is true for the loan officer. The more they can work together to help clients on their home-buying journey, the better.