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Which way will mortgage rates go in 2026? This is the question that will determine the direction of the housing market and how to invest in real estate for the next year. Today, I'm giving you my 2026 mortgage rate predictions. Then I'm going to share some other expert opinions on mortgage rates that I'm personally following. And then I will reveal the one big X factor that could totally change the mortgage market in 2026. Hey, everyone. Welcome to the BiggerPockets podcast. I'm Dave Meyer, and I'm excited to have you here for the kickoff to what we call prediction season. Every year around this time, major forecasters, banks, random people on the Internet, start to make predictions about 2026, and the housing market is certainly no exception. Some of the opinions that you might hear are solid, others not so much. So we here at BiggerPockets want to make sure that you're getting the best quality forecasts and information as you start planning your strategy and approach to 2026. So I am going to share with you my own personal predictions. And although past performance does not indicate future results, I've been pretty accurate at this the last couple of years. But on top of just my own opinion, I've gathered some reputable forecasts from across the industry to share with you as well. So that's what we're doing today, mortgage rates. And then next week, I'm going to share my predictions for price appreciation, rent growth, and all that. That's the plan. Let's do it. First up, why are we even talking about mortgage rates? Why are we dedicating an entire episode of this show to forecasting mortgage rates? I know everyone is probably tired of talking about it, but the reason I am doing this and spending time on this is that I think it's the single biggest variable. And what happens to the housing market next year? Yeah, there are tons of other important things we got to take into account. The labor market and tariffs and inflation and immigration and what institutional investors are doing, all of that. The list is long. But my theory about the housing market, which I've been talking about for, God, three years now and has so far proven to be right, is that affordability is the key to everything. And mortgage rates are the most important variable in affordability. The housing market is slow right now. We're going to have only about 4 million transactions in 2025, which might sound like a lot, but it's actually 30% below the average. And this is happening because we've hit a wall. We've hit an affordability wall. And although affordability can improve in other ways than mortgage rates, we can see wages go up and prices go down. Those are less likely to make a big impact in 2026. So the most important variable here is, and frankly the most volatile variable is mortgage rate. So this is why we're talking about it now. Fortunately, I know not everyone feels this way, but we should call out for a moment that 2025 was a good year for mortgage rates. Remember back in January, mortgage rates were around 7.2% and they've been falling. Now as of this recording In November of 2025, they've been in the 6.2 to 6.4 range the last couple of weeks leading up to this recording, which is pretty dead on for my prediction for 2025 rates. I think I actually nailed it this year and one year ago said this is about where we would be. That might not seem like some amazing foresight now, but I want you to remember that most forecasts, most influencers one year ago were saying this was the year that rates would finally come down and we would see them in the fives. And we're going to see some, some huge uptick in housing market activity because the Fed was going to cut rates. But personally I just didn't buy it. Just like I didn't buy that idea in 2023 or in 2024. As I've consistently said that rates wouldn't come down that much, despite that being an unpopular opinion. And I've said this because I am not focused on the Fed. I am focused on two other things when I look at mortgage rates. Number one is the yield on 10 year US treasuries and number two is something called the mortgage. And I want to talk for just a minute or two about these things work. I promise I will keep the Econ talk brief, but this is important. This will help you understand not just predictions that I'm going to make and whether or not you believe me, but this big X factor that I'm going to share that could really change everything. So let's learn how mortgage rates work. Mortgages are a long term loan lending to someone for potentially 30 years, right? A 30 year fixed rate mortgage is a long time. And banks and big institutional investors who buy mortgage backed securities and are basically the people providing money for mortgages, they want to make sure that they're getting paid an appropriate amount for that long term commitment. And to help set that price and help them figure out what they should be charging, these investors basically look for benchmarks in other parts of the economy, who else could they lend their money to? What rate could they get? If instead of a mortgage holder now, the biggest borrower, the biggest person that they could lend their money to is of course, I'm sure you could guess this. The federal government of the United States, the US Borrows a ton of money in the form of US treasury bills, also called bonds. And since the US has never defaulted on its debt, it has always paid the interest on those treasury bills. Lending to the US Government is generally seen as the safest investment in the world. So when investors are deciding who to lend to and they're looking for those benchmarks, they look first to the US Government and see if that's a good option for them. And this is why mortgage rates are tied to the 10 year US Treasury. Because despite most mortgages being amortized over 30 years, the average duration of an actual mortgage before someone sells their home or refinances is about 10 years. And so the 10 year yield is the closest benchmark for a mortgage. These investors could choose to lend to a mortgage holder for 10 years or they could take out a 10 year US Treasury. That's why these things are so closely correlated. But there is more to it. It is not just the yield. As I said, there is a second thing that we need to consider, which is called the spread. Because banks are not going to lend to you, I'm sorry to say, they're not going to lend to you at the same rate. They're going to lend to the US Government. That's just not going to happen. Full stop. No way. The average US Homeowner is just riskier than the United States government. Right. The chance of the average American homeowner defaulting on their mortgage is certainly higher than the US Government defaulting on its debt. And so investors build in what is called a risk premium, also known as a spread between the 10 year treasury and the mortgage rates. This is basically the additional money that these investors want to get paid for the additional risk they're taking on by lending to a homeowner instead of the US Government. You see this across the economy too. It's not just the difference between yields and mortgage rates. Like you see that auto loan rates are typically higher than mortgage rates because the chances of default on an auto loan are higher. And so the people who provide the money for those loans want a higher interest rate to compensate for that risk. The average spread between yields and mortgage rates over the last several decades is about 2%. So we're going to use that as an example here. So if you have the 10 year U.S. treasury, that's about 4%, the spread is 2%. That is a 6% mortgage rate. And that's how mortgage rates pretty much work. So I know there's a lot to that, but it's important. And again, my purpose here is not just to say a number, tell you to trust me. I want you to really understand and learn how these things move as it really does matter. And as a real estate investor, you're putting a lot of your own time and effort and money into, into an asset class that is very mortgage rate sensitive. So I think it's worth spending a little bit of time right now to learn how mortgage rates actually work because it really does impact your portfolio. And now that we've learned this, you could probably see why rates have come down this year. Spreads are down a little bit, just not too much. They actually came down a lot last year, but they started the year around 2.3 ish percent. Now they're around 2.2%. So that's a little bit of improvement. The big improvement that we've seen in mortgage rates has come from bond yields falling. They dropped from about 4.5% to about 4.1% as of today. And so you take 4.1% as of today, a 2.2% spread, you get a 6.3% mortgage, which is precisely what mortgage rates are today. Now you might be wondering, what about the Fed, right? Everyone makes so much noise about the Fed and rate cuts. Does what they do actually matter? Yes, it does matter, but it matters in a less direct way than yields and spreads. They basically only matter in terms of how much they influence the above variables. Right? Because federal funds rate cuts, what the Fed cuts, that can bring down bond yields, that can bring down spreads. But they're just less direct relationships. The federal fund rate is just one of many complicated factors like inflation, the labor market, supply and demand in the mortgage backed securities market, prepayment risk, all this other stuff. Like all those things go into what bond yields are and what the spread is going to be. And the federal fund rates matters, but it matters in the ways that it's influencing these other things down the line. So now you understand how mortgage rates work. I know it sounds complicated, but that's it. Just look at bond yields, look at spreads. Now that we know this, we can actually start making forecasts because we can break this down. Where bond yields going next year, where is the spread going next year? And that can tell us where mortgage rates are going. We're going to get into that right after this quick break. We'll be right back. Running your real estate business doesn't have to feel like juggling five different tools. With Resimpli, you can pull motivated seller lists, you can skip trace them instantly for free and reach out with calls or texts or all from one streamlined platform. And the real magic? AI agents that answer inbound calls. 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