Mortgage Interest Rate Forecast for Next 10 Years (2024)

If you are planning to buy a home or refinance your existing mortgage in the next decade, you might be wondering what will happen to the mortgage interest rates in the future. Will they go up or down? How much will they affect your monthly payments and your overall affordability? In this blog post, we will try to answer these questions by looking at some of the factors that influence mortgage rates and some of the expert predictions for the next 10 years.

What Factors Affect Mortgage Interest Rate Forecast for Next 10 Years?

Mortgage rates are determined by a complex interplay of supply and demand, risk and reward, inflation and expectations, and monetary policy and market forces. Some of the main factors that affect mortgage rates are:

The Federal Reserve:

The Fed is the central bank of the United States that sets the short-term interest rates that influence the cost of borrowing for banks and consumers. The Fed adjusts its policy rate, known as the federal funds rate, to achieve its dual mandate of stable prices and maximum employment.

When the Fed raises its rate, it makes borrowing more expensive and reduces the money supply, which tends to slow down inflation and economic growth. When the Fed lowers its rate, it makes borrowing cheaper and increases the money supply, which tends to stimulate inflation and economic growth.

The Fed's rate also affects the yield on Treasury bonds, which are considered safe investments that compete with mortgages for investors' money. When the Fed's rate goes up, Treasury yields tend to go up as well, which pushes mortgage rates higher. When the Fed's rate goes down, Treasury yields tend to go down as well, which pulls mortgage rates lower.

Inflation:

Inflation is the general increase in the prices of goods and services over time. Inflation erodes the purchasing power of money and reduces the real return on investments. Therefore, investors demand higher interest rates to lend money when inflation is high or expected to rise, and lower interest rates when inflation is low or expected to fall.

Mortgage rates are influenced by inflation expectations, which are reflected in various indicators such as the Consumer Price Index (CPI), the Personal Consumption Expenditures (PCE) index, and the breakeven inflation rate (the difference between nominal and real Treasury yields).

Economic Growth:

Economic growth is measured by indicators such as the Gross Domestic Product (GDP), the unemployment rate, and the consumer confidence index. Economic growth affects the demand for credit and the supply of savings in the market. When economic growth is strong or expected to improve, consumers and businesses tend to borrow more money to finance their spending and investment plans, which increases the demand for credit and pushes mortgage rates higher.

When economic growth is weak or expected to deteriorate, consumers and businesses tend to save more money and reduce their spending and investment plans, which decreases the demand for credit and pulls mortgage rates lower.

Market Forces:

Market forces are the interactions between buyers and sellers that determine the price and quantity of goods and services in a free market. Market forces affect mortgage rates through changes in supply and demand, risk and reward, and expectations and sentiments. For example, when there is a high demand for mortgages from homebuyers or refinancers, lenders can charge higher interest rates to ration their limited funds.

When there is a low demand for mortgages from homebuyers or refinancers, lenders have to lower their interest rates to attract more borrowers. Similarly, when there is a high supply of mortgages from lenders or investors, borrowers can negotiate lower interest rates to choose among many options. When there is a low supply of mortgages from lenders or investors, borrowers have to accept higher interest rates to secure their financing.

Market forces also affect mortgage rates through changes in risk premiums, which are the extra returns that investors require to invest in risky assets over safe assets. For example, when there is a high perceived risk of default or prepayment in mortgages, investors demand higher risk premiums to buy mortgage-backed securities (MBS), which are bonds that are backed by pools of mortgages.

When there is a low perceived risk of default or prepayment in mortgages, investors accept lower risk premiums to buy MBS. Risk premiums also depend on factors such as credit quality, loan-to-value ratio, loan term, loan type, and market liquidity.

What Are The Long-Term Predictions for Mortgage Rates?

Given the complexity and uncertainty of the factors that affect mortgage rates, it is impossible to predict their exact movements in the future. However, based on historical trends, current conditions, and future expectations, some experts have made projections for mortgage rates for the next 10 years. Here are some of them:

  • Long Forecast: Long Forecast is a website that provides forecasts for various financial indicators such as currencies, commodities, stocks, bonds, interest rates, etc. According to their latest forecast for 30-year mortgage rates in October 2023, they expect them to range from 7.40% to 7.86%, with an average of 7.63%. They also predict that mortgage rates will peak at 9.41% in May 2024, before gradually declining to 3.67% by November 2027.
  • Forbes Advisor:According to their latest forecast for 30-year mortgage rates in October 2023, they expect them to average 7.63%, based on a survey of 15 experts from various fields such as economics, finance, real estate, etc. They also predict that mortgage rates will fluctuate between 7% and 8% throughout 2024, before falling below 6% by the end of 2025.
  • CBS News: According to their latest forecast for 30-year mortgage rates in October 2023, they expect them to average 7.63%, based on the data from Freddie Mac, a government-sponsored enterprise that provides liquidity and stability to the mortgage market. They also predict that mortgage rates will drop to around 6% by the end of 2024 or the beginning of 2025, based on the opinions of several experts such as economists, analysts, and realtors.

As you can see, there is no consensus among the experts on what will happen to mortgage rates in the next 10 years. Some expect them to rise significantly, while others expect them to fall moderately.

However, most agree that mortgage rates will remain elevated in the short term due to inflationary pressures and Fed tightening, before declining in the long term due to economic slowdown and market correction.

Therefore, if you are planning to buy a home or refinance your existing mortgage in the next decade, you should keep an eye on the factors that affect mortgage rates and compare different options and scenarios to find the best deal for your situation.

It's important to note that forecasting Mortgage Interest Rates for the next 10 years is inherently challenging due to various unpredictable factors. Do not use the information as expert advice and be prepared for potential changes in the mortgage market.

References:

  • https://longforecast.com/mortgage-interest-rates-forecast-2017-2018-2019-2020-2021-30-year-15-year
  • https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/
  • https://www.noradarealestate.com/blog/projected-interest-rates-in-5-years/
  • https://www.cbsnews.com/news/when-mortgage-interest-rates-will-fall-according-to-experts/
Mortgage Interest Rate Forecast for Next 10 Years (2024)

FAQs

How high will mortgage rates go over next 5 years? ›

MBA: Rates Will Decline to 6.1% In its March Mortgage Finance Forecast, the Mortgage Bankers Association predicts that mortgage rates will fall from 6.8% in the first quarter of 2024 to 6.1% by the fourth quarter. The industry group expects rates will fall below the 6% threshold in the first quarter of 2025.

What will the mortgage rate be in 2027? ›

Meanwhile, mortgage woes could be somewhat reduced in the coming years, as OBR figures indicate that average mortgage interest rates will hit a peak of 4.2 per cent in 2027, 0.8 percentage points lower than the OBR forecast made in November.

How high could mortgage rates go by 2025? ›

The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%.

What will mortgage interest rates be in 2026? ›

The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.

Will mortgage rates ever drop below 5 again? ›

The good news is that inflation is cooling, and many experts expect interest rates to move in a downward direction in 2024. Then again, a two-point drop would be significant, and even if rates fall, they're not likely to get down to 5% within the next year.

Will interest rates ever go back to 3? ›

In summary, it is unlikely that mortgage rates in the US will ever reach 3% again, at least not in the foreseeable future. This is due to a combination of factors, including: Higher Inflation: Inflation is currently at a 40-year high in the US, and the Federal Reserve is raising interest rates to combat it.

What will the mortgage rate be in 2028? ›

Will mortgage rates come down in the next 5 years? Lord: “For the rest of 2023, I predict rates for the 30-year fixed-rate mortgage will average 7.3%, followed by 6.1% in 2024, 5.5% in 2025, 5% in 2026, 4.5% in 2027, and 4.5% in 2028.

How low will mortgage rates go in 2025? ›

Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."

Will interest rates go down in 2026? ›

The nation's top economists say the Fed is most likely to keep interest rates higher than 2.5 percent — often considered the “goldilocks,” not-too-tight, not-too-loose level for its benchmark federal funds rate — until the end of 2026, Bankrate's quarterly economists' poll found.

What will the interest rate be in 2030? ›

Last year, the White House projection for bill rates in 2030 was 2.4%. Such a level would be much higher than has been typical since the turn of the century. Three-month bill rates averaged around 1.5% over that period.

Do mortgage rates go down in a recession? ›

For people looking to buy a home, a recession can bring some advantages. When the economy is not doing well, home prices often drop, which can be good news for those who want to find a good deal; plus, during recessions, mortgage rates usually stay low, meaning buyers can get a home with lower monthly payments.

What will the interest rates be in 5 years? ›

Projected Interest Rates in the Next Five Years

ING's interest rate predictions indicate 2024 rates starting at 4%, with subsequent cuts to 3.75% in the second quarter. Then, 3.5% in the third, and 3.25% in the final quarter of 2024. In 2025, ING predicts a further decline to 3%.

How high will mortgage rates go in future? ›

Mortgage rates are likely to trend down in 2024. Depending on which forecast you look at for housing market predictions in 2024, 30-year mortgage rates could end up somewhere between 6.1% and 6.4% by the end of the year.

How long will interest rate remain high? ›

Many experts predict interest rates will remain at their current level for most of 2024. This may mean that mortgage rates stay at or about the same level as now for many months before possibly starting to fall towards the end of 2024.

What is the interest rate forecast for 2025? ›

The upper boundary of the Federal Reserve's target range for its benchmark interest rate, currently 5.5%, will fall only to 4% by the end of 2025, according to the latest Bloomberg monthly survey. That's a half percentage point higher than respondents expected just a month ago.

What will mortgage rates be by end of 2024? ›

Mortgage giant Fannie Mae likewise raised its outlook, now expecting 30-year mortgage rates to be at 6.4 percent by the end of 2024, compared to an earlier forecast of 5.8 percent.

How high will mortgage interest rates be in 2024? ›

That means the mortgage rates will likely be in the 6% to 7% range for most of the year.” Mortgage Bankers Association (MBA). MBA's baseline forecast is for the 30-year fixed-rate mortgage to end 2024 at 6.1% and reach 5.5% at the end of 2025 as Treasury rates decline and the spread narrows.

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