What's next? Mortgage rate predictions for the next 5 years

Core Insights - Mortgage rates are influenced by various factors, primarily the 10-year Treasury yield, and a five-year mortgage rate forecast has been developed based on this correlation [1][2] Treasury Yield Forecast - The 10-year Treasury yield is expected to remain around 4.5% for the remainder of 2023, with a gradual decline projected to 4.1% by 2027 [4] - The Congressional Budget Office (CBO) anticipates the Treasury yield to reach 4.1% by the end of 2025, decreasing to 4% in 2026 and stabilizing near 3.9% through 2029 [5] Spread Between Treasury and Mortgage Rates - The spread between the 10-year Treasury yield and 30-year fixed mortgage rates has fluctuated around 2.5 percentage points in recent years, compared to under two percentage points from 2010 to 2020 [5][6] - As of September 11, the 10-year Treasury yield was 4.01%, while the 30-year fixed mortgage rate was 6.35%, resulting in a spread of 2.34 percentage points [6] Five-Year Mortgage Rate Forecast - Based on the Treasury yield forecast and the estimated spread, mortgage rates are projected to be around 6.2% to 6.4% by 2027 [9] - There is no expectation for mortgage rates to drop significantly in the next five years, although unforeseen economic disruptions could alter this outlook [10]