Mortgage rates have dropped in January 2026. This is the lowest they have been in over 3 years. The year-over-year drop is almost a full percentage; at this time a year ago, the average rate for a 30-year fixed-rate mortgage was 7.04%. In January 2026, that rate has decreased to 6.06%. This is a game-changer for many borrowers.
What to Know About Interest Rates in January 2026
You are probably wondering why mortgage rates have dropped, especially considering all the other economic uncertainties going on right now.
One reason is that the midterm elections are coming up later this year. In response, the current administration has had the Federal Housing Finance Agency purchase $200 billion worth of bonds from Fannie Mae and Freddie Mac. You may recall that during COVID, we saw similar decisions.
In addition, the CPI Inflation Report has come out. The reported inflation rate of 0.2% is lower than the projected rate of 0.3%. This, too, has impacted mortgage rates, pushing them down.
What Can We Expect Home Prices to Do?
One question you might have is whether home prices are going to remain where they are, or if there is a chance they could decrease as the year unfolds.
That depends on which housing markets you are interested in buying in. There are some markets where a slight decline in home prices is projected, but others where it is believed prices will increase. Since an increase is expected for home values on average as a whole, it may be smarter to buy sooner than later.
Reasons to Buy a Home Now
Here are some reasons to buy a home in VA now, rather than putting it off:
- Interest rates could go up again in the future.
- Home prices may go up as well.
- Buying now lets you start building home equity right away.
- You can enjoy the benefits of homeownership sooner.
- You will no longer be throwing away money on rent.
- You can always refinance in the future if rates drop again at some point. So you are not stuck.
You might have some other reasons as well related to your scenario. Perhaps you need to move into a new home quickly to start a new job. Or maybe you have just discovered your dream home on the market, and you need to move on it before other buyers do.
How a Low Mortgage Rate Can Benefit You
If you lock in a low mortgage rate, you can look forward to multiple advantages.
- Affordable monthly payments: Even a single percentage in interest can make a huge difference in what you have to pay, especially over the long term. You could pay hundreds less a month, and tens of thousands less over the lifetime of the mortgage. There are calculators where you can enter in the numbers and see the difference for yourself without having to do the math.
- Pay less interest: Each month, you will save on interest. Plus, you might be able to pay off your mortgage sooner since it will be more manageable. That means fewer months for interest to be charged, saving you even more.
- Easier to buy a home right away: You could be in a situation where a 7% interest rate just is not affordable for you at all, but a 6% mortgage rate is. If that is the case, being able to access a lower rate may mean you can purchase a home now instead of waiting months or years to do it. You can then stop paying rent, and start building home equity instead, and investing in your future. You also may be able to purchase your dream home before another buyer swoops in.
- Buy more home: You may be able to afford a larger home with a lower interest rate, or one that has more special features. In this way, you can get more value for your money with a lower rate.
- Keep finances stable and predictable: You can choose either a fixed or adjustable mortgage rate. If you choose a fixed rate, then the rate you lock in now will be the rate for the entire loan term. Some other costs, like property taxes, could go up. But your mortgage rate will not. This helps to stabilize your finances.
For all of the reasons above, the 3-year mortgage rate low is exciting news for Virginia homebuyers and homeowners.
Buy a Home in Virginia
First Residential Mortgage is based in Blacksburg. We can help you buy a home or refinance anywhere in Virginia. If you are ready to take advantage of the current mortgage rates, please give us a call at (540) 838-5868 to schedule your mortgage consultation.
