Mortgage Rates Are Lower Than Last Year — Here’s Why That Matters in 2026

Mortgage Rates Are Lower Than Last Year — Here’s Why That Matters in 2026

If you’ve been watching the housing market from the sidelines, you’re not alone. A lot of buyers paused in 2025 because monthly payments just didn’t make sense.

But here’s the shift worth paying attention to as we head into 2026:

Freddie Mac’s weekly survey shows the average 30-year fixed rate was about 6.16% in early January 2026, compared with about 6.93% a year earlier — a meaningful drop.

And while a change under 1% may sound small, it can have a surprisingly big impact on your monthly payment.

How a 1% Rate Change Can Translate Into Real Monthly Savings

Mortgage payments are highly sensitive to interest rates. Even a modest shift changes how much of your payment goes to interest versus principal.

To put it in plain terms:

• On a $500,000 loan, a full 1% drop in rate can mean savings of around $330 per month on principal and interest (illustrative example; exact savings depend on your rate, loan amount, taxes/insurance, and loan type).

• That’s why buyers who couldn’t make the numbers work last year may want to take another look now.

(If your loan amount is higher — as it often is in Silicon Valley — the monthly difference can be even more noticeable.)

If Buying Didn’t Work in 2025, Re-Run Your Numbers for 2026

This is the part most people skip: they assume what was true last year is still true today.

But when rates move, your purchasing power and monthly payment can change. And that can open up options like:

• a different price point that feels comfortable

• a different down payment strategy

• a different loan program (or a cleaner plan to get there)

You don’t need to have everything figured out to start. You just need updated numbers.

The Smart Next Step: Get a Fresh Scenario (Not a Guess)

Online calculators can be useful, but they don’t reflect your full financial picture.

If you’re even considering a move this year, I recommend running a few scenarios with a trusted lender so you can see:

• what payment ranges look like today

• what your best rate options may be

• how credit, down payment, and timing affect your approval and cost

Bottom Line

Mortgage rates are meaningfully lower than they were a year ago — and even small shifts can change your monthly payment in a big way.

If buying didn’t work for you last year, this is your sign to re-run your numbers and see if 2026 could be your year.

If you’d like, I’m happy to connect you with a trusted local lender and help you interpret what the numbers mean for your goals here in Silicon Valley.

Note: This post is for general informational purposes and isn’t financial advice. Rates and payments vary by borrower and loan program.