Will Mortgage Interest Rates Continue Their Recent Decline Through Spring 2026?

While the Federal Reserve remains on hold, mortgage interest rates have become a focal point of market attention—but not for the reasons many expected. With the Federal Open Market Committee (FOMC) unlikely to cut rates before June, the real story lies elsewhere. Recent developments suggest that policy announcements from Washington are proving more influential than Fed action in shaping borrowing costs for homeowners.

Policy Surprises, Not Fed Action, Shape Recent Rate Trends

In late January 2026, the Mortgage Bankers Association reported a notable shift in market dynamics. According to the MBA’s data, refinance activity jumped dramatically—reaching levels not seen since September 2025, with loan applications climbing over 14% in a single week and refinancing requests up 20%. Compared to the same period last year, refinance volume soared 183%. This surge came despite the FOMC’s widely anticipated pause on rate adjustments.

So what drove this movement in mortgage interest rates when traditional Fed policy was stalling? The answer points to White House initiatives aimed at tackling housing affordability. Beginning in early January, a series of executive orders and policy proposals began reshaping market expectations for borrowing costs.

White House Housing Measures Reshape Mortgage Interest Rate Expectations

The Trump administration introduced three major housing proposals that have captured market attention:

Restricting institutional buyers: An executive order prohibiting corporate investors from purchasing single-family homes signals a fundamental shift in housing market structure, intending to open opportunities for first-time homebuyers.

Direct market intervention: Officials proposed that Fannie Mae and Freddie Mac purchase $200 billion in mortgage-backed securities—a direct mechanism to push mortgage interest rates lower by injecting demand into the lending market.

Retirement savings access: A third proposal would permit 401(k) holders to tap retirement accounts for down payments, expanding buyer purchasing power and theoretically supporting housing demand.

These announcements catalyzed measurable movement in mortgage interest rates. Starting from 6.16% for 30-year fixed mortgages, rates declined to 6.06%—a three-year low—before settling around 6.09%. Some lenders have already begun offering rates below 6%, according to market surveys.

Treasury Markets Drive the Mortgage Interest Rate Outlook

Understanding mortgage interest rate movements requires attention to an often-overlooked factor: 10-year Treasury yields. According to Jeff DerGurahian, chief economist at LoanDepot, this metric serves as the primary transmission mechanism between government policy and consumer borrowing costs.

The $200 billion mortgage bond purchase proposal appears to have temporarily supported mortgage interest rates by signaling sustained demand. However, DerGurahian cautioned that recent improvements could reverse if Treasury yields climb back into the 4.2% to 4.3% range. The relationship is direct: when Treasury yields rise, mortgage interest rates typically follow, offsetting gains from policy initiatives.

What 2026 Holds for Mortgage Interest Rates as Fed Remains on Pause

Looking ahead, forecasters remain divided on the trajectory of mortgage interest rates throughout 2026. J.P. Morgan’s analysis suggests one to two rate cuts may occur this year, though Wall Street skepticism remains. Michael Feroli, chief U.S. economist at J.P. Morgan, noted that if labor market weakness emerges or inflation drops materially, the Fed could implement rate reductions later in the year.

However, J.P. Morgan’s base case projects moderate inflation decline and labor market tightening by mid-year 2026—conditions that could push the Fed toward rate increases in late 2027 rather than cuts. With Jerome Powell’s tenure as Fed Chair concluding in May, leadership uncertainty adds another variable to mortgage interest rate predictions.

For consumers watching mortgage interest rates in the near term, the focus should remain on Treasury yield movements rather than Fed pronouncements. Without a definitive signal from the central bank about inflation progress, mortgage interest rates are likely to remain range-bound, responsive to fiscal policy announcements and 10-year bond market dynamics rather than monetary policy shifts.