"The reason mortgage rates are near yearly lows as we end the year is that the labor market has softened and mortgage spreads have returned to near-normal levels. Without these two variables, mortgage rates would have stayed higher for longer. My 2026 forecast is for the 10-year yield to range between 3.80% and 4.60%, and for mortgage rates to range from 5.75% to 6.75%."
"As I have often talked about, we have had a slow dance between the 10-year yield and 30-year mortgage rate for decades and Fed policy really moves 65%-75% of this. If the bond market really fears a recession as it did in 2023 and 2024 then the 10-year yield can easily break below 3.80%. Unlike those years, the 10-year yield didn't break under 3.80% in 2025, even with Godzilla tariffs and the fears that those would usher in a recession."
In 2025 the forecast projected the 10-year yield between 3.80% and 4.70% and mortgage rates between 5.75% and 7.25%. Actual 2025 ranges were close: the 10-year yield traded between 3.87% and 4.79% (including overnight trading) and mortgage rates between 6.13% and 7.26%. Mortgage rates fell toward yearly lows late in the year because the labor market softened and mortgage spreads normalized. Federal Reserve policy moves roughly 65%–75% of the relationship between the 10-year yield and the 30-year mortgage rate. The 2026 ranges are 3.80%–4.60% for yields and 5.75%–6.75% for mortgages, with stronger labor data able to push rates higher.
Read at www.housingwire.com
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