Mortgage interest rate predictions for the next 5 years

Core Insights - The Federal Reserve's recent interest rate cut on September 17 is expected to influence mortgage rates, with predictions of two additional cuts by year-end [1] - Mortgage rates are primarily influenced by the 10-year Treasury yield, which is projected to remain stable over the next five years [2][4] - A significant spread between the 10-year Treasury yield and mortgage rates has been observed, impacting future mortgage rate forecasts [5][6] Treasury Yield Forecast - Economists predict the 10-year Treasury yield will stay around 4.5% for the remainder of 2023, gradually declining to 4.1% by 2027 [4][5] - The Congressional Budget Office forecasts a similar trend, projecting a yield of 4.1% by the end of 2025 and 3.9% by 2029 [5] Mortgage Rate Spread - The historical spread between the 10-year Treasury yield and 30-year fixed mortgage rates has increased to approximately 2.5 percentage points in recent years, compared to under 2 percentage points from 2010 to 2020 [5][12] - Current examples show a spread of 2.14 percentage points, with the 10-year Treasury yield at 4.16% and the 30-year fixed mortgage rate at 6.3% [6] Five-Year Mortgage Rate Forecast - Based on the projected Treasury yields and the estimated spread, mortgage rates are expected to be around 6.2% to 6.4% by 2027 [9] - Predictions indicate that mortgage rates are unlikely to drop significantly in the next five years, barring unforeseen economic disruptions [10] Historical Context - The average spread between Treasurys and mortgage rates has shifted from approximately 1.7 percentage points in the 2010s to around 2.6 percentage points from 2022 to 2025 [12]