The Federal Reserve cut short-term interest rates for a third time in 2025. What's next for borrowers and consumers?

The average rate on a 30-year U.S. mortgage edged lower this week, staying relatively close to its low for the year.

NewHomeSource reports that most housing predictions for 2025 were accurate, with stabilized mortgage rates, increased inventory, and ongoing challenges for first-time buyers.

With average homes at $360,727 now, 5% mortgage rates in 2026 could push prices to $383K-$386K as 5.5M+ more buyers qualify, NAR data shows.

Mortgage interest rates have given homebuyers and homeowners some breathing room in recent weeks. After climbing to painful highs earlier this year, borrowing costs have started to ease as the Federal Reserve adjusts its approach and economic conditions shift.

Housing market economics will soon be impacted by a big real estate shift. Fannie Mae forecasts mortgage rates to change significantly by the end of 2026. The Federal Reserve cut rates amid persistent inflation and a housing market slowdown in 2024-2025.

According to projections released Wednesday, policymakers see just one cut in 2026, a sign that borrowing costs will likely remain near current levels rather than fall substantially in the months ahead.

Nationally, Fannie Mae expects home-price growth to slow from a 4.4% annual gain in 2024 and 2.5% rate in 2025 to a 1.3% pace in 2026. Realtor.com expects home prices to grow 2.2% next year. Zillow expects home values to increase 1.2% between November 2025 and November 2026.

The National Association of Realtors expects lower mortgage rates and rising inventory to boost sales by 14 percent next year.

The Bank's governor says interest rates are on a "gradual" downward path, and decisions around future cuts will be "a closer call".

Housing market predictions for 2026 show slower home price growth, not a collapse. Mortgage rates may ease slightly but remain above 6%. Inventory stays tight in many regions, keeping competition high.