Will Mortgage Rates Finally Drop Below 6%? Here’s What It Could Mean for Chicago Buyers and Sellers

Will Mortgage Rates Finally Drop Below 6%? Here’s What It Could Mean for Chicago Buyers and Sellers

After several years of roller-coaster mortgage rates and limited inventory, Chicago homebuyers may finally be catching a break. Mortgage giant Fannie Mae recently released a new forecast predicting that rates could dip below 6% by the end of 2026 — a milestone we haven’t seen since early 2022. That shift could be a game-changer for the Chicago housing market, where affordability has been stretched thin and many homeowners have been clinging to their ultra-low mortgage rates from the pandemic era.

According to Fannie Mae’s September economic and housing outlook, the average 30-year fixed mortgage rate is expected to fall to around 6.4% by the end of 2025 and slide further to 5.9% by the end of 2026. That’s a more optimistic projection than earlier forecasts, which kept rates above 6% well into 2026. If this trend continues, it would mark the first time in more than three years that Chicago buyers—from South Shore to Schaumburg—could lock in a mortgage rate starting with a “5.”

Rates have already shown some encouraging signs of easing. Freddie Mac reports that current 30-year fixed rates are hovering around 6.26%, the lowest in nearly a year. For many Chicago buyers who’ve been waiting for the right moment, that’s welcome news. Even a small rate drop can make a big difference. In neighborhoods such as Bronzeville, Humboldt Park, and West Pullman, where median home prices typically range from $250,000 to $400,000, a half-percent reduction in interest can save hundreds of dollars per month on a mortgage payment.

However, while mortgage rates may gradually fall, prices across much of Chicagoland remain firm. Areas with consistent demand—like Avondale, Hyde Park, and Oak Park—continue to attract strong competition, particularly for renovated greystones, single-family homes, and move-in-ready condos.

Most Chicago homeowners refinanced during the pandemic boom, locking in rates between 2.5% and 4%. That’s one major reason inventory remains tight—few are eager to give up a low mortgage for one that’s nearly double. Still, a sub-6% rate could mark an important psychological shift. As Realtor.com analyst Hannah Jones points out, when consumers see mortgage rates starting with a “5,” it often changes how they perceive affordability, even if the math doesn’t immediately improve. While it might not unleash a flood of new listings overnight, it could encourage more hesitant sellers in areas like Cicero, Romeoville, or South Holland to re-enter the market.

Even with slightly lower rates, affordability remains one of Chicago’s biggest housing challenges. Compared to other major U.S. cities, Chicago is still relatively affordable, but prices have steadily risen while incomes haven’t kept pace. Fannie Mae estimates that, nationally, affordability would only return to pre-pandemic levels if one of three things happened: home prices dropped nearly 40%, household incomes rose by more than 60%, or mortgage rates fell to around 2.35%. Needless to say, none of those scenarios appear likely in the near term.

In Chicago, median home prices now sit near $340,000, according to the Illinois REALTORS® association. That’s roughly 30% higher than in 2019, while household income growth has lagged far behind. So even if rates dip below 6%, affordability issues are still tied more closely to supply and income than interest rates alone.

Interestingly, the new-construction market could be the first to see meaningful benefits. Nationally, new-home sales jumped 21% in August, reaching their highest point since early 2022. In the Chicago suburbs—particularly in Plainfield, Joliet, and Oswego—builders are seeing renewed demand as buyers look to new homes amid limited existing inventory. If rates continue to edge lower, that trend could gain even more momentum.

Fannie Mae has slightly trimmed its national home sales outlook, now expecting around 4.7 million transactions in 2025 and about 5.1 million in 2026. Locally, that likely means a slow but steady rebound for Chicago-area sales, especially as sellers regain confidence and new listings start to pick up. Many agents throughout Cook, Will, and DuPage Counties are already reporting stronger buyer interest this fall—a promising sign heading into 2025.

If Fannie Mae’s forecast holds true and mortgage rates finally fall below 6%, it could breathe new life into Chicago’s housing market—from the bungalows of Beverly to the townhomes of Naperville. Buyers might find a little more breathing room in their monthly budgets, while sellers could feel newly motivated to make their next move. We may never return to the rock-bottom rates of 2020, but a steady slide back into the 5% range could mark the start of a healthier, more balanced market—one where deals start happening again.

Mortgage rates may finally fall below 6% by 2026, according to Fannie Mae.

Learn how lower rates could impact Chicago’s housing market, from affordability to new construction trends in neighborhoods like Bronzeville, Avondale, and Oak Park.