For buyers in San Jose, Campbell, and across Santa Clara County, this can feel discouraging. You've been saving, prepping, watching the market — and now rates are moving in the wrong direction. So what's actually going on? And more importantly, what should you do about it?

Let me break it down the way I'd explain it to a friend over coffee.

Short Answer

Mortgage rates are rising primarily because of inflation concerns tied to the conflict in the Middle East, which is pushing oil prices — and the cost of everything else — higher. The bond market reacts to inflation by demanding higher yields, and mortgage rates follow. There's no imminent reversal on the horizon, but this environment is still very workable for well-prepared buyers. Here's why:

How This Works in San Jose / Santa Clara County

1. The rate environment affects Bay Area buyers differently than most of the country — because our market has its own dynamics.

2. Inventory is still tight.

3. Santa Clara County's unsold inventory index sits at just over 2 months — well below the 3-4 months that defines a balanced market. That means competition among buyers hasn't gone away, even as rates rise.

4. Prices remain elevated.

5. The statewide median has crossed the $900,000 mark, and in the South Bay, we're well above that. Even a modest uptick in inventory hasn't translated into meaningful price relief for most buyers.

6. Jumbo loans are especially relevant here.

Because Bay Area purchase prices routinely exceed conforming loan limits, many of my clients are financing with jumbo products. Jumbo rates don't always move in lockstep with conventional averages — meaning there can be real opportunity to shop lenders and find competitive pricing even when headline rates look rough.

What this means for you:

If you're a qualified buyer waiting for rates to drop before making a move, the calculus is tricky. Home prices in this market haven't softened much — so waiting for a lower rate might just mean paying more for the home itself.

Common Misunderstandings

1. "I should just wait for rates to come down."

This is the most common thing I hear right now. And I get it — no one wants to lock in at the high. But waiting for rates in the Bay Area has historically cost buyers more in appreciation than they saved in interest. If rates do drop meaningfully, expect competition to increase and prices to firm up further. You can always refinance; you can't go back in time to buy a house at last year's price.

2. "A higher rate means I can't afford to buy."

Not necessarily. What a higher rate means is that your monthly payment changes — but there are tools to manage that. Seller concessions, buydowns, adjustable-rate products, and choosing the right loan structure can all affect your real-world payment. A conversation with a licensed mortgage professional — not just an online calculator — will give you a far clearer picture.

3. "All lenders have the same rates."

They don't. Rates vary meaningfully from lender to lender based on their pricing models, product mix, and margins. Shopping two or three lenders on the same day can surface real differences. I've seen clients save thousands over the life of a loan simply by comparing.

What to Think About Before Deciding

Before you make a decision — whether to buy now, wait, or do something else — here are the questions worth sitting with:

1. How long do you plan to stay in the home? The longer your horizon, the less short-term rate fluctuations matter.

2. Is your financial picture solid? Credit score, down payment reserves, and debt-to-income ratio are your negotiating power. Now is a good time to shore those up if they need work.

3. Do you understand your loan options? Conventional, jumbo, FHA, VA, ARM vs. fixed — each has a different profile. The best loan depends on your specific situation, not what worked for your neighbor.

4. Have you been pre-approved recently? Pre-approvals from even three months ago may not reflect current rate environments or lender guidelines. A current pre-approval gives you clarity — and confidence when you find the right home.

When a Conversation Makes Sense

If you're trying to sort out whether now is the right time to buy — or if you already have a home in escrow and you're watching rates nervously — this is exactly the kind of conversation I have every day.

I'm not here to push you into anything. My job is to make sure you understand your options clearly so you can make a decision that's right for your family, your finances, and your timeline. Whether that's locking a rate today, structuring a buydown, or waiting three months with a concrete plan — let's figure it out together.

If you know someone who's been on the fence about buying in the Bay Area, feel free to share this post. Sometimes the most helpful thing is just having someone explain what's actually happening — without the sales pitch.

Frequently Asked Questions

Why are mortgage rates going up in 2026?

The primary driver right now is inflation tied to rising oil prices from the conflict in the Middle East. Higher inflation puts upward pressure on Treasury yields, which mortgage rates closely follow. The 30-year fixed has risen approximately 30 basis points over the past five weeks.

Will mortgage rates come back down in 2026?

Forecasts suggest rates will remain in the mid-to-low 6% range through 2026, with modest dips possible if the Fed proceeds with a rate cut or if geopolitical tensions ease. A dramatic drop to the 5% range is not broadly expected in the near term.

Is it still a good time to buy a home in San Jose or Santa Clara County?

That depends entirely on your personal financial situation and timeline. Inventory remains tight, prices are still elevated, and competition hasn't disappeared. A well-prepared buyer with solid credit and realistic expectations can absolutely find opportunity in this market. A licensed mortgage professional can help you understand what you actually qualify for.

What is a mortgage rate buydown and should I consider one?

A buydown is a way of temporarily or permanently reducing your interest rate by paying points upfront — sometimes funded by seller concessions. It can make sense in a higher-rate environment if it brings your payment into a comfortable range. Whether it's the right move depends on your situation, which is worth discussing with your loan officer.

What's the difference between a jumbo loan and a conventional loan in the Bay Area?

Conforming (conventional) loans are capped at a loan limit set annually by the FHFA — for 2026, that's approximately $806,500 for most of Santa Clara County. Anything above that is a jumbo loan, which has different qualification requirements and pricing. Given Bay Area home prices, many buyers here end up in jumbo territory without realizing it until they start the loan process.

Chris Johnson

Associate Broker | Affinity Mortgage

NMLS #235072 | Company NMLS #252576

(408) 687-6109

chris_j@ouraffinity.com

caliloanpro.com

2542 S Bascom Ave, Suite 185, Campbell, CA

Equal Housing Lender. All loans subject to credit approval. This post is for educational purposes only and does not constitute a commitment to lend or a guarantee of any specific rate or program. Rates shown are national averages as of publication and individual rates will vary based on creditworthiness, loan-to-value, property type, and other factors. Consult a licensed mortgage professional for advice specific to your situation.