With the Federal Reserve cutting interest rates for the first time this year on Sept. 17, two more potential rate cuts, and a third week of government shutdown, where are long-term mortgage rates headed? Mortgage interest rates are determined by a number of factors, the main one being the 10-year Treasury yield. At Yahoo Finance, we’ve created a five-year mortgage rate forecast based on the 10-year yield correlation that provides some insight.
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Mortgage rate forecasts are best obtained from trends in 10-year Treasuries. Although the two rates often move in the same direction, there is a difference between them, which we will look at below.
First, let’s understand where Treasury yields are headed over the next five years. We will combine human analysis with data taken from artificial intelligence to make a prediction.
Michael Wolf is Deloitte Touche Tohmatsu Ltd. global economist. June The Deloitte Global Economics research center released an updated forecast for the US economy, in which Wolf laid out the company’s expectations for Treasury yields over the next five years.
“We expect the 10-year Treasury yield to hover near 4.5% for the rest of this year, despite softer economic data and a 50 basis point cut from the Fed in the fourth quarter of 2025,” he wrote. “The 10-year Treasury yield begins a slow decline in 2026, falls to 4.1% by 2027 and will remain so until the end of 2029.”
Let’s draw that prediction.
It’s not a lot of movement. Analysts at Goldman Sachs agree, saying the 10-year Treasury through 2027 will remain almost 4.1 percent.
Meanwhile, the Congressional Budget Office (CBO) predicts that Treasury yields will rise by 2025. will be 4.1% at the end of the year, and in 2026 will decrease to 4%, and by 2029 will remain almost 3.9%.
As we mentioned above, the 10-year Treasury and 30-year fixed mortgage rates are separated by a spread. In recent years, the difference between the two has been 2.5 percentage points. This is a significant change from the difference from 2010. by 2020, when it was less than two percentage points and often close to 1.5.
Using a 2.5 percentage point spread, here’s an example of how Treasury and mortgage rates compare:
10-year Treasury rate = 4%
Difference = 2.5 percentage points
Mortgage interest = 6.5%
Here’s a recent example: September 24 The 10-year Treasury yield was 4.16%, while the 30-year fixed mortgage rate was 6.3%. The difference was 6.3 – 4.16 = 2.14 percentage points.
The latest version of the AI, GPT-5, suggested a spread of 2.1 to 2.3 percentage points. Here is her rationale:
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Historic Standard (2010): ~1.7 pages
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Recent years (2022-2025): ~2.6 pages
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Estimated 5-year mean difference: ~2.1-2.3 percentage points
Using these spread estimates, we can now complete our five-year mortgage rate forecast.
Using the Treasury forecast from above, we add the spread between the bond market and 30-year fixed mortgage rates to come up with a five-year forecast:
Of course, these are long-term estimates based on historical norms and broad expectations. All of those numbers could be thrown out the window if any of the following happens:
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10-year Treasuries perform above or below forecasts. For example, yields may decrease during a severe economic downturn, such as a recession.
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The spread between Treasury and mortgage rates narrows or widens.
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The monetary policy promoted by the Federal Reserve Bank is fundamentally changing.
There are no predictions that the mortgage rate will be 3% in the next five years. But who saw mortgage rates this low in 2007 when rates were about the same as they are now? Things like the Great Recession and a global pandemic are rare, and such drastic events are what it takes to send mortgage rates into the basement.
The above analysis predicts that in 2027 mortgage rates will be around 6.2-6.4%.
Based on the above estimates, mortgage rates will not decrease significantly over the next five years. However, a recession or other unknown economic disruption (such as a financial collapse or pandemic) can change the outlook.
If you’re considering an adjustable-rate mortgage with an initial fixed-rate period, the first thing you’ll want to consider is how long you’ll actually be staying in the home you’re financing. Then comes the long-term mortgage rate forecasting. The best way is to choose the initial term that best fits your current budget.
Laura Grace Tarpley edited this article.