Forecast Indicates Mortgage Rates Will Drop Below 6% by 2026 End

Expected Decline in Mortgage Rates by 2026

According to the latest release by Fannie Mae, the mortgage landscape is anticipated to undergo a notable transformation in the coming years. The Economic and Strategic Research (ESR) group at Fannie Mae predicts that mortgage rates will decrease, closing 2025 at 6.4 percent and further dropping to 5.9 percent by the close of 2026. This decline is noteworthy for both potential homebuyers and current homeowners considering refinancing options.

Impact on Home Sales

The ESR group's projections do not just stop at mortgage rates. They forecast that sales of new and existing homes will also see a significant uptick. The total home sales are expected to reach approximately 4.72 million in 2025. This figure is projected to rise further to about 5.16 million in 2026, indicating a robust resurgence in the housing market. Such substantial growth in home sales can be attributed to the favorable economic indicators, including the expected drop in mortgage rates, which may enhance affordability for buyers.

One of the most remarkable shifts to note is in single-family mortgage origination activity. It is projected that origins will reach around $1.85 trillion in 2025 and soar to about $2.32 trillion in 2026. This increase demonstrates the expected rise in purchasing power among buyers, paralleling the decrease in borrowing costs due to lower rates.

The Refinancing Boom

Additionally, the ESR group anticipates a significant rise in the refinance share of mortgages. The refinance share is expected to escalate from 26 percent in 2025 to 35 percent in 2026. As rates venture lower, more homeowners will find the opportunity to refinance their existing mortgages at better terms, potentially leading to substantial savings over the life of the loan.

Economic Influences

While these projections paint a promising picture for the real estate market, it is crucial to acknowledge that several external factors can influence these outcomes. Economic conditions, consumer confidence, and other financial trends may also play a pivotal role in the performance of both housing sales and mortgage rates. Fannie Mae’s ESR Group evaluates these elements continuously, ensuring that their forecasts remain aligned with the ever-evolving economic climate.

Continuing Research and Insight

Fannie Mae encourages stakeholders and consumers alike to stay informed about the latest economic insights and research findings. Interested parties can access a wealth of resources, including the full report on the September 2025 Economic and Housing Outlook, by visiting Fannie Mae's Data and Insights section on their website. Staying updated with housing market research can empower homebuyers and homeowners with knowledge to make informed decisions regarding their investments.

Conclusion

As we look toward the end of 2026, the prospects for homeowners and potential buyers appear increasingly favorable with the expected drop in mortgage rates. The forecasted rise in home sales and refinance activity could herald a new chapter in the housing market, making homeownership more accessible for many. Those interested should watch the market closely and consider acting strategically as these trends unfold.

For continuous updates and insights into housing and economic forecasts, make sure to follow the reports and analyses provided by the Economic and Strategic Research Group at Fannie Mae.