Housing News

The Fed Lowered Interest Rates. Will It Give the Housing Market a Boost in 2026?

Lower interest rates could give the housing market a boost in 2026.

The U.S. Federal Reserve cut rates by a quarter of a percentage point on Wednesday to stimulate the economy as unemployment rises. This is the third quarter-point cut of the year.

Even with the Fed’s cut, mortgage rates are expected to remain in the low 6% range through the rest of the year, said New American Funding Chief Investment Officer Jason Obradovich.

Mortgage rates are separate from the Fed’s short-term interest rates. However, they generally move in the same direction. So, if the Fed indicates a cut is on the horizon, mortgage interest rates typically come down.

“Generally, mortgage rates will be unchanged unless there’s some surprise in the Fed’s 2026-2027 forecast,” Obradovich said.

Mortgage rates averaged 6.19% for 30-year, fixed-rate loans in the week ending Dec. 4, according to the latest Freddie Mac data.

That’s down from a high of 7.04% this year in mid-January, according to Freddie Mac.

Lower rates can result in smaller monthly mortgage payments, boost the purchasing power of buyers, and potentially save money for homeowners who refinance their loans.

For example, homebuyers who bought a $420,000 property would save $177 a month if their rate fell from 7% to 6.2%. That adds up to more than $2,100 a year and nearly $64,000 over the life of a 30-year, fixed-rate loan. (This assumes buyers put 20% down and doesn’t include property taxes, insurance, or homeowner association fees.)

The Fed is expected to lower rates twice more in 2026. This has the potential to bring down mortgage rates further.

“It’s going to put downward pressure on mortgage rates,” said Obradovich. “It’s very likely that mortgage rates will be in the 5s for some part of 2026.”

Lower rates are expected to help the housing market, drawing in more homebuyers.

“It’s going to continue the bolster the housing market that’s struggling with affordability,” said Obradovich.