The new year has delivered a modest gift to prospective homebuyers: mortgage rates have finally slipped below the 6% mark that has served as a stubborn ceiling for affordability calculations since late 2022.

According to Zillow's latest data, the national average 30-year fixed mortgage rate stands at 5.99% as of January 2, 2026—the lowest level in over a year. The 15-year fixed rate has fallen even further, averaging 5.38%.

How We Got Here

The rate decline caps a dramatic journey for borrowing costs. After starting 2025 near 7%, mortgage rates embarked on a steady descent throughout the year. Freddie Mac's final weekly survey of 2025 pegged the 30-year average at 6.15% as of December 31—down from 6.18% the prior week and well below the 6.76% rate from the same period in 2024.

Several factors converged to push rates lower:

  • Federal Reserve rate cuts: The Fed reduced its benchmark rate at three consecutive meetings in the fall, bringing the target range to 3.5%-3.75%
  • Cooling inflation: Consumer price growth moderated throughout 2025, giving the Fed room to ease policy
  • Labor market softening: A slowdown in hiring reduced concerns about wage-driven inflation

What This Means for Monthly Payments

The difference between a 7% mortgage and a 6% mortgage is substantial for household budgets. On a $400,000 loan, the shift from 7% to 6% reduces the monthly principal and interest payment from approximately $2,661 to $2,398—a savings of $263 per month, or $3,156 annually.

For buyers who have been waiting on the sidelines, the math has finally shifted in their favor. At current rates, a household with $100,000 in annual income and no other debts could qualify for roughly $450,000 in home financing—up from around $400,000 when rates hovered near 7%.

The Catch: Rates Aren't Expected to Fall Much Further

Before buyers rush to lock in rates, housing economists caution that the current decline may be close to its bottom for 2026.

"Mortgage rates are expected to hover near 6.3% in 2026," said Danielle Hale, chief economist at Realtor.com. Redfin projects a similar trajectory, with 30-year rates averaging 6.3% for the year—actually slightly higher than current levels.

The Mortgage Bankers Association forecasts rates will remain near 6.4% through 2026, while Fannie Mae expects a gradual decline to around 5.9% by the fourth quarter.

"A lot of the challenges that the housing market has been grappling with—the lack of affordability and the 'lock-in effect' on existing homeowners—are still going to be present in 2026, but the grip is kind of loosening."

— Danielle Hale, Chief Economist, Realtor.com

The Lock-In Effect Persists

Even with rates below 6%, the housing market faces a structural challenge: millions of homeowners who locked in mortgages at 3% or lower during 2020-2021 have little incentive to sell and take on a new loan at twice the rate.

This "lock-in effect" has constrained housing inventory for over two years, preventing the normal churn that keeps the market functioning smoothly. While some loosening is expected as life events—job changes, divorces, growing families—force sales regardless of rate differentials, economists don't expect a flood of new listings.

Home Prices: Finally Showing Restraint

The silver lining for buyers is that home price appreciation appears to be cooling. Redfin forecasts home prices will rise just 1% in 2026—a dramatic slowdown from the double-digit gains of recent years.

More importantly, wage growth is expected to outpace home price appreciation for the first time since the pandemic. This gradual improvement in affordability could help more first-time buyers enter the market, even if mortgage rates don't fall significantly from current levels.

Should You Buy Now?

The decision to buy a home depends on far more than interest rates alone. Personal financial stability, job security, desired location, and long-term plans all factor into the equation.

That said, the current rate environment presents a reasonable window for qualified buyers:

  • Rates below 6% offer meaningfully lower monthly payments than buyers faced throughout most of 2024 and 2025
  • Price moderation means buyers aren't chasing rapidly appreciating assets
  • Inventory is slowly improving in many markets, giving buyers more negotiating power

The common wisdom that buyers should "marry the house, date the rate" still applies. If rates fall further in coming years, refinancing remains an option. But waiting for dramatically lower rates could mean competing with more buyers if affordability improves for everyone simultaneously.

The Bottom Line

After years of punishing mortgage rates, 2026 is beginning with cautious optimism for the housing market. Rates below 6% won't solve every affordability challenge, but they represent meaningful progress from the 7%+ levels that locked out many would-be buyers.

For those who have been patiently saving for a down payment and waiting for conditions to improve, the new year may finally be delivering the opportunity they've been seeking.