The landscape of mortgage interest rates has dramatically shifted as we enter 2026, contrasting sharply with the conditions of 2024 and 2025. After experiencing unprecedented lows in 2020 and 2021, where rates dropped below 4% and often even under 3%, the market has undergone significant changes fueled by rising inflation and subsequent rate adjustments by the Federal Reserve.
In 2022, inflation surged, leading to a rise in interest rates. However, as inflation began to taper off in 2023 and 2024, the Federal Reserve responded by initiating rate cuts, with three reductions in the last four months of 2024 and a similar pattern throughout 2025. These adjustments contributed to a notable decline in mortgage rates, which fell approximately one percentage point by the end of 2025.
As we begin 2026, the average mortgage purchase rate for a 30-year term stands at 5.87%, while the 15-year mortgage rate is at 5.25%. These figures serve as benchmarks for prospective homebuyers. A rate lower than these averages, particularly if the difference is significant, can be deemed a “good” or even “excellent” rate in today’s market. While these rates are not as favorable as those seen earlier in the decade, they are among the best available given the current economic climate.
Mortgage interest rates are fluid, fluctuating daily based on various factors. With crucial events scheduled for January, including upcoming inflation data and a Federal Reserve meeting, there’s potential for further rate decreases. Such declines may provide opportunities for those who have hesitated to enter the market due to affordability concerns.
To secure a mortgage rate below the current averages of 5.87% and 5.25%, buyers are advised to shop around. Obtaining quotes from at least three lenders can help establish a competitive baseline. It’s wise to compare various offers, keeping in mind that closing costs and fees can affect the overall savings associated with a lower rate.
Furthermore, making a down payment larger than the conventional 20% can reduce the lender’s risk, potentially leading to more favorable rates for borrowers. It’s also advisable for buyers to manage their debt levels and maintain a good credit score, as both factors significantly influence the rates they are offered.
In this evolving economic landscape, a methodical and informed approach to borrowing is crucial. While mortgage rates are currently better than average, they are still a departure from the historic lows of the past few years. Buyers should take action if they find suitable homes and can manage the associated mortgage payments. They also have the option to refinance in the future should rates drop further, making this a promising time for potential homeowners to enter the market.