Mortgage interest rates continue to lead the conversation and remain one of the most powerful forces shaping the South Bay housing market as we move into 2026. Buyer confidence, seller timing, and overall transaction volume are all closely tied to the direction rates take next. In many ways, interest rates remain the single biggest lever influencing market behavior.
Over the past 12 months, however, we’ve seen meaningful and encouraging progress. On January 16, 2025, the St. Louis Fed’s 30-year fixed mortgage average stood at 7.04 percent. One year later, on January 15, 2026, that figure had fallen to 6.06 percent, its lowest level since 2022 and a notable shift from the elevated rate environment buyers had grown accustomed to.
A full percentage-point decline is no small feat, particularly against a backdrop of lingering inflation concerns, ongoing geopolitical tensions, and persistent political uncertainty both at home and abroad. Despite these headwinds, mortgage rates steadily trended lower throughout much of the year. Even accounting for short-term volatility, rates remained meaningfully improved year over year, ticking up modestly to 6.10 percent by January 29, 2026, compared to 6.95 percent at the same time in 2025.
This downward movement reflects several broader shifts in the economic landscape. Inflation has continued to cool from its recent peaks, the Federal Reserve has adopted a noticeably more dovish tone, and President Trump has floated the possibility of a $200 billion government purchase of mortgage-backed securities.
Here in the South Bay, the story looks even more nuanced. Jumbo mortgage rates are often the benchmark for our local market and have consistently run close to a full percentage point below national averages. Local lenders and credit unions have remained aggressive, with some offering jumbo fixed-rate loans below 5 percent for five-or seven-year terms. By the end of 2025, momentum was building, and it appeared that 4.75 percent jumbo rates were poised for a meaningful comeback.
Then the market got spooked.
In early January, volatility returned abruptly. Equity markets stumbled, tensions in the Middle East escalated, and an unexpected global political dispute over Greenland unsettled investors. As risk sentiment shifted, mortgage markets reacted swiftly. The national 30-year fixed rate jumped roughly a quarter point in less than a week, while local jumbo rates climbed by approximately 0.4 percent.
Today, in mid February, things have settled down but there is still uncertainty in the market. Credit Union rates can’t seem to crack 5% and worries over AI and a minor tech tantrum have some on edge.
Even so, the broader year-long trend still points lower. While near-term fluctuations may persist, I remain cautiously optimistic that rates could ease again as we move into the spring. If that materializes, it would help unlock pent-up demand and potentially set the stage for a more active and competitive buying season. That said, the road ahead may be less smooth than many anticipated just a few weeks ago.
For now, ongoing volatility and global uncertainty could delay the spring surge that once felt inevitable. While falling rates remain on the table, their arrival may be uneven and drawn out rather than quick and decisive.
Buyers and sellers alike should continue to monitor rate movements closely in the weeks ahead. Even modest shifts can materially impact monthly payments and overall affordability, especially in high-cost coastal markets like the South Bay, where small changes are often magnified.
As always, I’ll continue tracking the data and sharing timely insights on mortgage trends and what they mean for real estate decisions in 2026.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]