What's the mortgage interest rate forecast for January 2026? Here's where rates could head next.

Interest rates remain top of mind for homebuyers in the new year, especially after years of volatile swings driven by inflation and Federal Reserve rate fluctuations. The past year drove rates down, but borrowers now are watching rates in 2026, wondering whether mortgage rates are likely to continue moving lower, hold steady, or climb again.

Many experts predict rates to be lower in 2026 than they were in 2025, but no mortgage interest rate forecast is certain. Today's outlook is shaped by a handful of key factors, including the expected Fed rate cut path, inflation trends, movements in the bond market and consumer confidence. All these variables can influence where mortgage rates head next, but experts caution against viewing these economic factors too closely and in isolation.

If you're hoping to "time the market" and lock in a favorable rate, it can help to know how experts are looking at these economic signals and how you should be, too. Below, we'll detail where mortgage interest rates could specifically be headed this January.

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What's the mortgage interest rate forecast for January 2026?

Most housing market experts expect January 2026 to bring a continuation of the same forces shaping rates today rather than a dramatic shift. Federal Reserve rate cuts often raise a lot of questions, but so does the speculation and forecasts that lead up to them. However, the general sentiment is that rates will either hold steady or fall mildly, and that they're unlikely to rise.

Inflation, economic growth, and the Federal Reserve are major components that shape how mortgage interest rates rise and fall. You should remain aware of where those factors stand in January when determining whether right now is the right time for you to purchase a home. How mortgage rates move the rest of the year will vary, but experts also caution against viewing economic signals as a compass for your decisions.

"While economic signals provide important insights to the economy at large, they should inform rather than dictate a consumer's decisions," said Cyndee Kendall, Region Lending Director for Northern California and Nevada at Citi. "Prospective homebuyers and those considering refinancing should focus on their personal financial situation over attempting to perfectly time the market, always seeking advice from a mortgage professional."

Although rates may be on the decline, it doesn't necessarily mean now is the best time for everyone to buy a home. Your financial situation is unique, and you should evaluate your decisions based on factors like your income and debt along with the economic factors that are driving mortgage rates.

"At the end of the day, even if mortgage rates decline, affordability is still what really matters," said Winnie Sun, Managing Director of Sun Group Wealth Partners. "If your incomes aren't keeping up, or job stability feels uncertain, it may be difficult for someone to feel confident taking on a 30-year mortgage, no matter how attractive the rate may seem."

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Experts expect lower rates in the new year

Experts agree that mortgage rates may not move much in January 2026, but that if they do move, they'll go down. If the Federal Reserve continues its path toward further rate cuts and we continue to experience slower economic growth, experts expect early 2026 to be the beginning of a period during which rates fall gradually. We won't see a return to the low rates from early 2021, but a mortgage rate lower than 6% is a strong reality in January 2026.

Several factors would need to stabilize for rates to remain where they are. According to Sun, "If inflation stays around current levels, bond markets don't experience major shifts, and hiring or layoff trends remain consistent, then we may not see much movement in mortgage rates."

Markets react to expectations about future rate cuts from the Federal Reserve. But even without a rate cut, progress on inflation along with rising or steady unemployment could continue to drive mortgage interest rate drops.

"Inflation generally dictates interest rate movements, while employment data influences consumer confidence," said Kendall. "If we see a rise in unemployment, it could negatively impact consumer confidence and may send ripples through the economy, likely driving mortgage rates lower."

What January's rate forecast means for homebuyers

Although a lower mortgage rate is an ideal outcome for buyers hoping to break into the market in the new year, it also comes with increased risks to employment. A low mortgage rate is never a great reason on its own to buy a home, and the same goes for any rate you might get on any other kind of loan. You need to consider your buying power, financial goals, and why the rate is low or falling, especially when lower rates are the result of volatility in the labor market.

"Mortgage rates falling due to a weakening labor market may not be enough of an incentive for buyers who may be concerned about their own job security," said Matthew Gardner, Real Estate Economist. "Although a weakening economy and lower inflation are good signals that mortgage rates are going to become more favorable, I would caution anyone thinking that they can 'time the market.'"

The bottom line

All signals point to steady or lower mortgage rates in January 2026, but you shouldn't justify your home purchase on numbers alone. You should view your decision through the economic factors influencing lower mortgage rates because these factors may impact other areas of your life as well. However, you might also want to consider future rate cuts.

When assessing whether now is the best time for your home purchase, Sun urges consumers to ask themselves, "If you or your partner (if applicable) lost your job, even just for a few months, would you still be able to stay in your home comfortably?"

A lower mortgage rate isn't a reason to purchase more home than you can afford. It also isn't a reason to buy a home at all if you aren't confident the labor market will sustain your lifestyle, mortgage, and other debts. While you may be concerned about the potential that mortgage interest rates rise, if affordability is not compatible with your income the rate won't make much of a difference on how the expense impacts your finances.

On their own, falling rates are a good sign for buyers, but you should consider the variables influencing how those rates are moving, how you might be impacted, and what you can do to prepare for an unexpected, sudden loss of income.

"Recently, we've seen more smart, capable individuals out of work for six months or longer," said Sun. "It happens, so having a plan for income disruption can make a big difference."