The average 30-year mortgage rate dropped by 89 basis points from a high of 7.04% in 2025, according to Freddie Mac. But where are rates headed in the next five years? Mortgage interest rates are determined by several factors, all of which can give us a clue to the future. Mortgage rates are tuned to the government bond market Mortgage rate forecasts may be best derived from trends in 10-year Treasury note rates. While the two rates often track in the same direction, there is a spread between them that ...

Core Insights - The Federal Reserve's recent interest rate cut and expectations for further cuts may influence long-term mortgage rates, which are primarily determined by the 10-year Treasury yield [1][4] - A five-year mortgage rate forecast has been developed based on the correlation with the 10-year Treasury yield [2][7] Treasury Yield Forecast - Economists predict the 10-year Treasury yield will remain around 4.5% for the remainder of 2023, 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, decreasing to approximately 3.9% by 2029 [5] Mortgage Rate Spread - The spread between the 10-year Treasury yield and 30-year fixed mortgage rates has averaged around 2.5 percentage points in recent years, compared to under 2 percentage points from 2010 to 2020 [5][12] - As of September 17, 2023, the 10-year Treasury yield was 4.06%, with a corresponding 30-year fixed mortgage rate of 6.26%, resulting in a spread of 2.2 percentage points [6] Five-Year Mortgage Rate Forecast - Based on the Treasury yield forecasts and the estimated spread, mortgage rates are projected to be around 6.2% to 6.4% by 2027 [9] - The analysis indicates that mortgage rates are not expected to see drastic declines in the next five years, barring significant economic disruptions [10]