Why are mortgage rates still going up, and how can you buy in 2026?

Many prospective home buyers hoped mortgage rates would fall more dramatically after spiking in 2023 and 2024. While rates have eased from their recent peaks above 7%, they're still hovering around 6.36% as we are close to entering the second quarter. While this may feel frustrating to those waiting on the sidelines for rates to drop, the truth is that you don't have to wait for perfect market conditions to pursue homeownership. Understanding what drives mortgage rates and how they affect home affordability can help you achieve your home buying goals on your own timeline.

What causes mortgage rates to increase?

Mortgage rates move in response to a variety of economic factors. While you can't control these broader trends, knowing what influences rates can help you plan your finances more strategically. Here are some factors that affect interest rates:

• Federal Reserve policy: The Federal Reserve doesn’t set mortgage rates directly. However, it uses the federal funds rate as a tool to maximize employment while keeping prices stable. When the Fed raises this rate to combat inflation, borrowing costs throughout the economy typically increase, including mortgage rates. As of December 2025, the federal funds rate stood at 3.72%, down from highs above 5% in 2023.
• Inflation trends: While a modest amount of inflation signals a healthy economy, too much can erode your purchasing power. When inflation runs hot, the Fed typically responds by raising interest rates to slow spending and cool price growth.
• Economic growth indicators: When the economy is strong, low unemployment can lead to wage increases as employers compete for workers. While higher wages are beneficial for workers, they can also fuel inflation if people are willing to pay more for goods and services. To prevent the economy from overheating, the Fed may raise rates to moderate growth and keep inflation in check.
• The bond market: Mortgage rates are closely tied to the demand for mortgage-backed securities (MBS) in the bond market. When investors become concerned about potential defaults on the mortgages that make up these securities, bond yields typically rise to compensate for the increased risk.

To give you a better context for how mortgage rates have risen and fallen over time, here’s a look at the average interest rate for a 30-year fixed-rate mortgage over the past few decades. While current rates are higher than pandemic-era lows, they still remain within the historical norm.

How are interest rates determined?

The interest rate you're offered on a mortgage depends on a combination of market-wide factors and your personal financial situation. While you can't control broader economic conditions, you do have significant influence over the personal factors that affect your mortgage rate.

Economic factors

A home buyer can’t control the interplay between the housing market, economic growth, the Federal Reserve, or inflation. If your home purchase coincides with lower interest rates, you can save money with a fixed-rate loan. If market rates are higher when you buy, it may limit your ability to afford a home. If you can afford a home, it’s possible to refinance¹ when interest rates fall.

Personal factors

The interest rate you’re offered on a mortgage will also be based on information about your finances, including your:

• Credit score: Borrowers with higher credit scores typically qualify for lower rates because they are seen as less risky to lenders. Taking time to improve your credit score before applying can potentially save you thousands of dollars over the life of your loan.
• Down payment: A larger down payment demonstrates financial stability and reduces the lender's risk, which can result in a more favorable rate.
• Loan term: Shorter loan terms typically come with lower interest rates but higher monthly payments, while longer loan terms mean higher interest rates but lower monthly payments.
• Property type: Primary residences typically receive the lowest rates, while second homes and investment properties come with slightly higher rates.

How different loan types respond to rising rates

Mortgage rates don’t move the same way for every loan type. Each product is influenced by different market forces, so understanding these distinctions can help you make informed decisions.

• Fixed-rate mortgages: These loans keep the same interest rate for the entire term.
• Adjustable-rate mortgages (ARMs): These loans have a fixed interest rate for a set period and then change on a regular basis depending on the market. While ARMs may start lower than fixed-rate loans, their future adjustments could lead to a higher interest rate in the long term.

Why predicting mortgage rates is difficult

While experts may make predictions, it’s not easy to tell what future rates will be because mortgage rates depend on constantly shifting economic data, including:

• Market expectations around inflation
• Federal Reserve policy decisions
• Employment and wage trends
• Global economic events that affect investors

It’s hard to know what future market conditions will look like when you become ready to buy a home. Focusing on your own financial readiness is the part you can control.

How rising rates can affect affordability

Having a lower interest rate on a fixed-rate mortgage means you get to lock in a lower monthly payment and pay less interest overall. A higher interest rate means you’ll be making a higher monthly payment, and the total cost of your mortgage will be higher. This can influence:

• The price range you’ll be able to afford
• The type of loan you choose
• How much you decide to put down
• Your long-term budgeting plans

Even when interest rates are relatively high, many home buyers move forward and buy when they can and start building equity.

How you can buy a house in this market

Mortgage rates aren’t as low as they were a few years ago, but they’re nowhere near as high as they’ve been in the past. Here are some practical steps to take to buy a home in this current market.

• Assess your financial readiness. Your interest rate will affect your monthly payment, so it's crucial to understand what you can comfortably afford. You can use our mortgage calculator to see how interest rates affect your monthly payment.
• Check your credit report. A strong credit score can get you a lower interest rate. Review your credit report for errors and take steps to address any issues you find. Even small improvements in your credit score can translate to meaningful savings over the life of your loan.
• Explore your mortgage options. A fixed-rate mortgage locks in your rate when you close, giving you predictable monthly payments for the life of your loan. An adjustable-rate mortgage starts with a lower introductory rate that adjusts periodically. If you're comfortable with some payment fluctuation or plan to refinance or sell before the rate adjusts, an ARM might work for you.
• Consider your local market conditions. If you're buying in a buyer's market where supply exceeds demand, you may have more leverage to negotiate. While you can't negotiate the interest rate set by market conditions, you might convince the seller to pay some of your closing costs, reducing your upfront expenses.
• Consider buying mortgage points. Purchasing mortgage points allows you to pay more upfront in exchange for a lower interest rate. One point typically equals 1% of your loan amount. If you can afford the up-front cost, it can get you a lower interest rate and reduce your monthly payment.

How to decide when to buy a house

You can't control market conditions, but you can control when you're financially and personally ready to buy. Some buyers try to time the market and wait to buy until rates drop. However, every month you wait is a month you aren’t building equity. If rates drop in the future, you could choose to refinance.

The best time to buy is when you're financially and emotionally prepared. If you have a stable income, a solid down payment, and can comfortably afford the monthly payments at current rates, you may be ready to move forward.

Tips for getting a good interest rate

Only time will tell if rates drop, remain steady, or increase in the next few years. If you plan on making a home purchase now, consider the following tips to get the best interest rate you can in current market conditions.

Shop around for a lender

It’s always a good idea to shop around for a lender and compare different offers to make sure you’re getting the best loan terms. When choosing a mortgage lender, consider rates, loan terms, the lender's reputation, and the service you’ll receive.

After all, you’ll likely be making payments on your home for a long time, so working with a lender you can trust is crucial. Be sure to compare apples to apples regarding the type of loan.

Once you find a lender, you should also take the time to get preapproved. This will tell you how much the lender is tentatively willing to loan you up to a certain amount. Having a preapproval will help you better understand how much home you can afford and show sellers that you’re a serious buyer who can secure financing.

Get a mortgage rate lock

Many lenders, including Rocket Mortgage, offer a mortgage rate lock, which allows homeowners to secure a set interest rate during loan processing. If interest rates rise in the interim before closing on your mortgage, you’ll keep the rate you locked.

But keep in mind that you’ll only reap the benefits of a mortgage rate lock if you can close on your loan during the lock period. Rate locks typically last 30 to 60 days, depending on the lender.

Purchase mortgage points

Another way to lower your interest rate is by buying mortgage points from your lender. With points, you’ll pay an upfront fee in exchange for a lower interest rate. One point is typically equal to 1% of the total loan amount – so one point on a $300,000 loan would be $3,000. Lenders usually allow you to buy multiple points or fractions of points, but the amount that each point reduces your interest rate varies by lender

Future refinancing options

Market conditions can change, as can your financial profile. If interest rates drop or your credit score improves, refinancing down the line can be a worthwhile option to score you a lower interest rate. Refinancing does come with upfront closing costs, and there’s no guarantee that a future refinance will save you money. However, it’s helpful to know that even with a fixed-rate mortgage, your interest rate isn’t necessarily permanent.

FAQ about mortgage rates

Here are answers to common questions about rising mortgage rates.

Why did mortgage rates go up?

After hitting historic lows during the onset of the COVID-19 pandemic, mortgage rates increased in 2022 and 2023. A sharp rise in inflation led the Federal Reserve to hike the federal funds rate, and mortgage rates followed.

Will mortgage rates drop in 2026?

Rate changes depend on future economic data, which makes it impossible to know for sure what future rates will look like. In December 2025, the Federal Reserve made its third consecutive cut to the federal funds rate. As of March 2026, the average interest rate for a 30-year fixed-rate mortgage 6.00%.

How do I find the best mortgage rate?

Mortgage rates vary based on market conditions, lender pricing, and your financial profile. Shopping around and getting quotes from different lenders can help ensure you get the most favorable terms possible given your credit history and current interest rates. 

What is the current mortgage rate?

Mortgage rates change regularly. To get the most up to date mortgage rates, you can visit our Rocket Mortgage daily rates page for the latest information.

When should I lock my mortgage rate?

If you’re ready to buy a home and anticipate increasing rates, lock your rate as soon as possible. That way, if rates rise between the time it takes to close on your mortgage, you’ll still get to keep the original lower rate.

The bottom line: High interest rates don’t have to hold you back

Getting a low interest rate can save you money, but you can’t control where market rates are when you’re ready to buy. If you have the money to make a down payment and afford your mortgage, you don’t have to put off becoming a homeowner. If you find your dream house, don’t let rising rates stop you from realizing your dream.

The most important factors are your personal financial readiness and finding a home that fits your life. If you've found your dream house and you're financially prepared, don't let today's rates hold you back from realizing your homeownership goals.

Explore your loan options and find out how much home you can afford in 2026.

¹Refinancing may increase finance charges over the life of the loan.

Any housing market projections, forecasts, or predictions referenced are forward-looking statements based on current information and assumptions as of the date provided. Such statements are inherently uncertain and subject to risks and changes beyond our control. No guarantee is made regarding the accuracy, completeness, or future performance of any projection. This content is not intended to influence or determine any individual financial, investment, lending, or real estate decision.

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