"In my 2025 forecast, I anticipated the following ranges: Mortgage rates between 5.75% and 7.25% The 10-year yield fluctuating between 3.80% and 4.70% Overall, 2025 is on track with my forecast. The 10-year yield has remained within its proper range in response to Federal Reserve policy and economic conditions, while mortgage rates have fluctuated between 6.29% and 7.25%."
"But the simple answer here is Fed policy is still too restrictive to get mortgage rates to really go lower than 6% and stay there. In the past two years, the 10-year yield has reached levels of 3.37% and 3.63%. At those levels, we could see mortgage rates drop below 6% today, especially given the favorable spreads currently available. However, during both of those periods, the bond market was anticipating a recession."
"If the spreads today were as bad as they were at the peak of 2023, mortgage rates would currently be 0.83% higher. Conversely, if the spreads returned to their normal range, mortgage rates would be 0.47% to 0.67% lower than today's level. Historically, mortgage spreads have ranged between 1.60% and 1.80%. The best levels of normal spreads would mean mortgage rates at 5.82% % to 6.02% today."
The 2025 forecast projected mortgage rates between 5.75% and 7.25% and the 10-year yield between 3.80% and 4.70%. The 10-year yield has stayed within that range, while mortgage rates have moved between 6.29% and 7.25%. Job growth has slowed but mortgage rates have not dropped below 6%. Past 10-year yield levels of 3.37% and 3.63% could allow sub-6% mortgage rates given current spreads, but those periods coincided with recession expectations. Improved mortgage spreads versus 2023–2024 have aided pricing; if spreads worsened, rates would be roughly 0.83% higher, while normal spreads could lower rates by 0.47%–0.67%.
Read at www.housingwire.com
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