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May, 2026
Mortgage Rates – When Is It A Good Time To Make The Move?
What are the first questions asked when discussing with a potential buyer or seller the possible buying or selling of a real estate property. Correct….What is the mortgage rate? Will it go up or down? And is it a good time to make the move, or is it better to wait? If anyone can answer those questions in this economic and political environment with 100 percent certainty, they should head to Atlantic City and play roulette.
But one thing is certain. The chance that 30-year mortgage rates will start with 2s or 3s again are probably near zero. That ship has sailed and not heading back. But are mortgage rates as bad as the media reports? Granted, they are significantly higher than they were back in 2023 – 2024, and have contributed to the notion that homes are unaffordable right now. However, when looking back over the past three spring home buying seasons, the clouds over mortgage rates start to clear a bit.
Rates currently stand at their lowest level over the past three spring buying cycles. According to Freddie Mac, rates peaked during the spring market in April 2024 at 7.22 percent, and since have been on a rollercoaster, decreasing to under 6.0 percent in September 2024, rising to 6.76 during the 2025 spring market and standing at around 6.30 percent at the end of April, the 2026 spring market. As of this writing, the first week of May, rates are around 6.35 percent; a drop of .87 percentage points since the spring 2024 market.
So, if you are a seller hoping for strong buyer demand due to increased affordability, or a buyer looking for a favorable mortgage rate environment, this is actually a good time to make the move. As one senior mortgage broker mentioned, it is never timing the market. It is always time in the market that makes buying a home a great investment.
An Example
As an example of why timing the market is not the best approach to participating in real estate, let’s look at a first time home buyer possibly purchasing a $400,000 home. If the buyer bought the home on January 13, 2025 with an mortgage rate of 7.26 percent, the buyer would be paying $2,731 per month in principal and interest. If the same buyer waited until May 4, 2026, the buyer would be paying $2,534 per month in principal and interest; a decrease of $197 per month, or $2,758 over the 16 months. Looks like a good deal. But, what would the buyer have lost in appreciation during the same period? Roughly $15,000 at an annual appreciation rate of 3 percent (a conservative number). By waiting, the buyer saved $197 per month, but lost $940 per month in appreciation.
Let’s take the example one step further. If the buyer waits till mortgage rates decrease to 5.99 percent, the payment for principle and interest does decrease to $2,396 per month. That is a savings of $138 per month versus purchasing in May, 2026. A positive view. However, when will rates drop below 6 percent is unknown. And during that time appreciation is lost and perhaps also the home of one’s dream as well.
Granted, these examples do not take into consideration the financials of the home buyer. $197 per month, the difference from January 13, 2025 to May 4, 2026, can make a huge difference in whether a potential home buyer can afford to become an actual home buyer. So, herein lies the great news about mortgage rates. They have come down where mortgage payments for the $400,000 example home have gotten approximately $197 per month cheaper over the past year. Those savings will obviously increase or decrease depending on the price of the home. But, the point is, this decrease and associated savings, should allow more potential home buyers to enter the market and help build buyer demand for home owners looking to sell.
What Is Ahead For Rates?
To answer this question, Market Watch defers to the experts in this field. And those are Fannie Mae, the Mortgage Banker’s Association and Wells Fargo. And they do not predict much movement in rates over the next year. For the next quarter, the average of all three suggests a decrease to 6.23 percent. After that, the average forecast calls for a very stable mortgage rate environment, dropping down to 6.17 percent in the fourth quarter 2026 and staying there for the next two quarters.
As a check point for these projections, Market Watch compared them with what forecasters are predicting for 10-year Treasury yields during a similar time period. As readers of Market Watch know, mortgage rates are tied to the yields of the 10-year Treasury note, plus a “spread”, and not the Federal Fund rate. If the yield was 4.20 percent and the spread 1.76 percentage points, the normal spread, the mortgage rate for a 30-year loan would be pegged at 5.96 percent (4.20 + 1.76).
Over the past several years, however, due to economic and world uncertainty, the normal spread of 1.76 percentage points had increased to 2.79 percentage points. Recently, that spread has decreased and now is below 2.25 percentage points.
Forecasters are calling for 10-year Treasury yields to increase from 4.47 percent in May, to 4.72 by the end of the first quarter of 2027. So, the question that should be asked, if Treasury yields are increasing why are mortgage rates predicted to decrease? Remember the spread between the 10-year yield and the mortgage rate. If the spread is now decreasing faster than the yield is predicted to rise, the mortgage rate will fall, albeit slowly.
So, if these forecasts are correct, home buyers should not be looking for a huge discount in mortgage rates over the next year. Unless there is a significant change in the economic and political environment, the drop in rates from the 7.22 percent rate in April 2024 to now, might be a best case scenario for buyers. And for sellers, even a 10 basis point drop in rates going into next year could spur demand for available homes as potential buyers sitting on the side lines jump in. This increase in demand will go a long way in maintaining the seller’s market of the past several years.
