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After a strong end to 2025, mortgage rate volatility could make 2026 difficult for Massachusetts homebuyers.
Interest rates began to trend downward toward the end of last year. According to mortgage-buyer Freddie Mac, the average 30-year mortgage rate was 6.15 percent to end 2025, a drop from 6.85 percent at the end of 2024.
“Late last year, interest rates were trending downward because of what looked like signs of a weakening labor market and also signs of inflation,” Redfin Chief Economist Daryl Fairweather said. “That would support the Federal Reserve cutting interest rates to something closer to a neutral rate. That wouldn’t hurt the economy, but wouldn’t really help the economy either.”
But after last weekend, there is now much less clarity.
Watch Fed Fight, Mortgage Bond Buys
Federal Reserve Chair Jerome Powell released a written statement and a video message Jan. 11 that the Department of Justice served the central bank with grand jury subpoenas threatening a Powell himself with a criminal indictment related to his testimony before the Senate Banking Committee last June.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” Powell said. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether instead monetary policy will be directed by political pressure or intimidation.”
President Donald Trump has long called for the Federal Reserve to cut interest rates to ultra-low rates, and the week before Powell announced the subpoenas, Trump posted a call on social media for Freddie Mac and Fannie Mae to buy $200 million in mortgage bonds.
“That sparked a lot of activity and a little bit of rate movement down,” Leader Bank President Jay Tuli said. “We’ll see if that’s possible, if they have the authority to do that.”
It all adds up to a lot of uncertainty about where interest rates are headed, and therefore what kind of mortgage market lenders and prospective homebuyers are headed into.
Where Are Rates Headed?
JPMorgan Chase CEO Jamie Dimon made headlines early last week warning that political meddling in the traditionally independent Federal Reserve would cause interest rates on all loans to rise “over time.”
But between political pressure from Trump and the wobbly job market, CrossCountry Mortgage Senior Vice President Andrew Marquis believes that. in 2026 at least, interest rates could continue to go down.
Marquis believes that the typical mortgage rate could even drop to 5.5 percent in the coming weeks, noting that rates tend to dip more early in the year compared to during the spring market.
Fairweather believes rates are likely to remain flat and expects significant volatility in 2026.
“It was looking good last week, especially with the president announcing that $200 billion purchase of mortgage bonds that did move rates down, but then this investigation is making investors really nervous and pushing rates up again,” she said. “So, I think we’re in for a bumpy ride.”
If rates do drop, there could be a flurry of activity the Leader Bank president predicted.
“There’s a lot of policy factors that are being put out there that seem like it would push rates down,” Tuli said. “That potentially could spark more refi volume, but also a lot more purchase volume.”
Tuli believes if rates go down, existing homeowners who are looking for a new home will get off the sidelines and not be restrained by any remaining mortgage rate lock-in effect. Homeowners looking to move won’t face as significant of a rate jump compared to prior years.
“As those people who wanted to move but haven’t start to be like ‘We can do it now,’” Tuli said. “What actually unlocks a lot more inventory and more inventory on the market and more options will provide some relief on the home prices as well.”
Volatility Could Drag Out Buying Season
With a weak job market and a battle brewing between the Federal Reserve and the executive branch of the federal government, Redfin’s Fairweather isn’t the only real estate expert interviewed for this story who is worried that rate volatility will be present throughout 2026.
Additionally, uncertainty regarding federal trade policies has the potential to drive rates up or down – the Supreme Court is expected to weigh in on whether the Trump administration tariff regime that threw the spring home-sales market off kilter in 2025 is even legal.
And sudden changes in interest rates can see a house that was once affordable for a buyer suddenly become too much of a cost burden.
Federal Reserve Chair Jerome Powell speaks to reporters at a Dec. 10 press conference. A potential federal criminal indictment against Powell, seen by many in the business world as politically motivated, could cause swings in mortgage rates this spring. Federal Reserve photo / Handout
“The uncertainty alone pushes rates up,” Fairweather said. “It pushes up the yield curve, it pushes up the spread. As rates move up and down, I think that makes it harder for buyers to know when they should lock in their interest rate, which, for them, just makes them uncertain about how much exactly they can expect to pay if they were to buy a home.”
Rate volatility can also impact how long seasonal markets last, as demand gets stretched out, said CrossCountry’s Marquis.
“Especially last year, we had a lot of political uncertainty going on in the market,” he said. “We had this weird market that was more elongated, in the sense that it was less concentrated. It wasn’t like half the business was done between April and June. It was more like 30 percent but then it continued through the summer, and we were still doing deals in July and August. The fall pop in September, October wasn’t really there, but then we had a longer stint through November and December.”
Hopes for Big Jump in Business
Along with high rate volatility, Marquis believes there will be a heightened sense of rate sensitivity among all buyers. Homebuyers looking to sell and buy again will be especially sensitive to mortgage rate movements, Fairweather said.
Sam Lattof
“They’re really trying to time everything just right,” she said. “When there’s a lot of volatility, they don’t really know what interest rate they can expect when they buy again.”
Even with rates poised to spike or decline seemingly at a moment’s notice, local lenders are still confident that 2026 will see more buyers enter the housing market and an increased level of activity. Marquis said he is expecting a 20 percent increase in business.
In the Greater Boston market, the high-cost nature of properties could see affordability worsen. The median price for a single-family home in the region was $760,000 in November according to The Warren Group, the publisher of Banker & Tradesman. The median condominium sold for $622,500.
“In a high-cost market like Boston, small changes in mortgage rates have a big impact, because the bigger the mortgage the more impactful changes in rates are to the market,” Fairweather said. “There’s a lot of volatility that can add costs or add affordability to buyers. That volatility, it makes the market a little bit harder to navigate.”
