Projection of trends and outcomes until 2030 based on statistical analysis and available data
Mortgage Rate Forecast: What to Expect in the Next Five Years
Introduction to Mortgage Rates
Mortgage interest rates have been a topic of discussion in recent years, with the average 30-year mortgage rate dropping by 89 basis points from a high of 7.04% in 2025. To understand where rates are headed, we need to examine the factors that determine mortgage rates, including trends in the 10-year Treasury note.
Understanding Treasury Yields
The 10-year Treasury yield is a key indicator of long-term interest rates. According to Michael Wolf, a global economist at Deloitte Touche Tohmatsu Ltd, the 10-year Treasury yield is expected to remain above 4.1% through 2030. This forecast is based on the firm’s U.S. economic forecast, which takes into account various economic factors.
Mortgage Rate Forecast
To forecast mortgage rates, we need to consider the spread between the 10-year Treasury yield and the 30-year fixed mortgage rate. This spread has been around 2.5 percentage points in recent years. Using this spread, we can estimate the mortgage rate based on the Treasury yield. For example, if the 10-year Treasury yield is 4%, the mortgage rate would be around 6.5%.
Factors Affecting Mortgage Rates
There are several factors that can affect mortgage rates, including:
Economic Conditions
A recession or other economic disruption can significantly impact mortgage rates.
Monetary Policy
The Federal Reserve plays a crucial role in setting monetary policy, which can influence mortgage rates.
Spread Between Treasurys and Mortgage Rates
The spread between the 10-year Treasury yield and the 30-year fixed mortgage rate can fluctuate, affecting mortgage rates.
Conclusion
Based on the analysis, mortgage rates are not expected to drop significantly in the next five years. However, a recession or other unknown disruption to the economy could change the outlook. If you are considering an adjustable-rate mortgage, it’s essential to select the initial term that best suits your current budget and consider the potential risks and benefits. Ultimately, the best approach is to stay informed and adapt to changing economic conditions.
