Mortgage rates have been slowly but steadily ticking up throughout 2026, approaching their pandemic-era high.
The average 30-year fixed rate mortgage is 7.4%, according to Freddie Mac on Thursday, unchanged from the previous week but a jump from 6.7% in September. It’s the highest rate since October 2023, when mortgage rates reached 7.8%.
For about a two year stretch, mortgage rates were largely on the decline, dipping under 6% as recently as February and giving would-be homebuyers hope that they may be able to get a more affordable loan in the near future. But the war with Iran, which began later that month, has reignited inflation — and mortgage rates.
But as the year closes out, will rates keep climbing, stabilize or start to fall?
Money asked three mortgage industry experts for their predictions. While their exact forecasts varied slightly, they all agreed: Mortgage rates aren’t likely to drop any time soon.
“There will likely be some zig-zagging along the way as economic data and inflation expectations shift, but I don’t anticipate a meaningful, sustained decline,” says Odetta Kushi, deputy chief economist at the mortgage firm First American.
How high will mortgage rates get in 2026?
Given hotter-than-expected inflation in September, experts tell Money that mortgage rates may continue their upward march in the months ahead.
On Wednesday, the Labor Department reported the annual inflation rate for September was 3.7%, an increase from 3.4% in August. That adds to the case that the Federal Reserve could hike interest rates again later this month, a move that would put upward pressure on mortgage rates.
“I expect mortgage rates to increase from where they are now,” says Lisa Sturtevant, chief economist at Bright MLS.
Overall, experts are predicting that 30-year fixed rates will hover around 7.5%, with one economist forecasting rates as high as 7.8% by the end of the year.
“There are reasons to believe that mortgage rates could remain elevated through the rest of 2026,” Joel Berner, senior economist at Realtor.com, tells Money. Those include unpredictable geopolitical conflicts abroad, sticky inflation at home and long-term economic trends.
If the economy continues on a “path of elevated inflation,” Berner says rates are likely to remain in the 7.2% to 7.8% range for the rest of the year.
Meanwhile, Kushi sits on the lower end of that range, expecting rates in the neighborhood of low-to-mid 7%, and Sturtevant predicts rates ultimately settling in around 7.5% by the end of the year.
When will mortgage rates fall?
Aside from the ups and downs that Kushi mentioned, it’s difficult for analysts to predict when mortgage rates will noticeably decline. They are closely linked to inflation, and a major factor pushing up prices now is the war in Iran.
“The wildcard for mortgage rates through the end of the year is geopolitical and economic uncertainty,” Sturtevant says.
Should the war resolve, mortgage rates may moderate, but no one knows exactly when that may be.
Then, there’s a more structural reason that’s driving up rates, according to Berner. That’s the federal budget deficit, which is the shortfall between government revenue and spending. The federal government has been running a deficit since 2002, but the gap has grown substantially in recent years.
To cover the gap, the government sells bonds. The bigger the deficit, the more bonds it sells. And when there is a greater supply of bonds, Berner says, investors demand higher yields from the government.
This directly impacts mortgage rates because these long-term loans follow 10-year Treasury yields as their benchmark. So when Treasury yields rise, mortgage rates typically follow.
Inflation expectations are also baked into Treasury yields. When investors assume inflation will linger, they tend to demand higher yields on the bonds they buy from the government.
With inflation proving stickier than expected, this presents a double whammy for mortgage rates and suggests they will remain above 7% for the foreseeable future.
On Wednesday, Fannie Mae revised its mortgage rate projections to 7.4% for the rest of the year — up from September’s prediction of 6.8% — and increased the outlook for 2027 to 7.5% for the entire year.
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