Over the past calendar year, U.S. mortgage interest rates have shifted in a way that’s beginning to open the door for more buyers and refinancers in an otherwise challenging housing market. After hovering above 7% earlier in 2025, the average rate on a 30 year fixed mortgage has eased into the low 6% range. That's a full percentage point drop compared with a year ago! This moderation in borrowing costs can meaningfully increase purchasing power and lower monthly payments, which puts buying or refinancing within reach for more households as we move deeper into 2026.
This decline in mortgage rates comes against a backdrop of broad housing market trends. Existing home sales nationally lingered near multi-decade lows in 2025, with approximately 4.06 million transactions, marking the weakest annual pace since the mid 1990s and well below the long term average of about 5.2 million. While sales started to rebound late in the year, with December climbing to an annualized rate of 4.35 million units, overall activity stayed suppressed as affordability pressures persisted.
Home prices are still rising, just more slowly, with national medians in the low to mid $400,000s. Again, well below the rapid growth of recent years but still out of reach for many buyers. Inventory remains tight, keeping competition alive, yet the roughly one percentage point drop in mortgage rates over the past year offers cautious optimism, easing monthly payments by hundreds of dollars for many and helping affordability begin to improve, especially for first time buyers.
Looking ahead, economists and real estate analysts are watching how these factors interplay: whether cooling home prices and rising inventory can broaden opportunities for buyers, and how mortgage rate trends continue to evolve in 2026. Lower borrowing costs, even modest ones, can be enough to stir more buyer interest and prompt action among homeowners considering a move or refinance as the year unfolds.
As the market continues to adjust, opportunities are emerging for both buyers and sellers who are prepared and well informed. Whether you’re considering a move, exploring your purchasing power, or simply want to understand how these shifts may impact your home’s value, having a clear strategy is key. If you’re thinking about buying or selling in the coming months, I would be happy to provide personalized guidance and insights to help you navigate the process with confidence. Reach out to me if you'd like to know more!
