With expectations that the Federal Reserve will cut its rate at next week’s meeting, increasing national debt, and a government shutdown in its fourth week, where are mortgage rates heading long term? Mortgage interest rates are determined by many factors, a primary one being the 10-year Treasury yield. At Yahoo Finance, we’ve designed a five-year mortgage rate forecast, built on a 10-year yield correlation, that provides some insight.

MORE: Learn about the best mortgage lenders right now.

Mortgage rate forecasts might best be derived from 10-year Treasury note trends. While the two rates often track in the same direction, there is a spread between them that we will account for below.

First, let's understand where Treasury yields are headed in the next five years. We'll combine human analysis with data pulled from artificial intelligence to put together a prediction.

Michael Wolf is a global economist at Deloitte Touche Tohmatsu Ltd. In June, the Deloitte Global Economics Research Center issued an updated U.S. economic forecast in which Wolf laid out the firm's Treasury yield expectations over the next five years.

"We expect the 10-year Treasury yield to hover near 4.5% for the remainder of this year, despite a softening in 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 to decline slowly in 2026, falling to 4.1% by 2027 and remaining there through the end of 2029."

Let's chart that forecast.

That's not much movement. Goldman Sachs analysts agree, saying the 10-year Treasury will remain near 4.1% through 2027.

Meanwhile, the Congressional Budget Office (CBO) forecasts the Treasury yield to be 4.1% by the end of 2025, down to 4% in 2026 and remaining near 3.9% through 2029.

Learn why mortgage rates increased after the Federal Reserve rate cut.

As we mentioned up top, the 10-year Treasury and 30-year fixed mortgage rates are separated by a spread. That difference between the two has been on either side of 2.5 percentage points in recent years. That's a significant change when compared to the spread from 2010 to 2020 when it was under two percentage points — and often near 1.5.

Using a 2.5 percentage point spread, here's an example of how Treasurys and mortgage rates compare:

10-year Treasury rate = 4%

Spread = 2.5 percentage points

Mortgage rates = 6.5%

Here's a recent example: As of Sept. 24, the 10-year Treasury yield was 4.16%, and the 30-year fixed mortgage rate was 6.3%. The spread was 6.3 - 4.16 = 2.14 percentage points.

The latest version of artificial intelligence, GPT-5, suggested using a spread of 2.1 to 2.3 percentage points. Here is its rationale:

Historical standard (2010s): ~1.7 pp

Recent years (2022 to 2025): ~2.6 pp

Estimated 5-year average spread: ~2.1 to 2.3 percentage points

Using these spread estimates, we can now complete our five-year mortgage rate forecast.

Here are 8 strategies for getting the lowest mortgage rate possible.

Using the Treasury forecast from above, we add the spread between the bond market and 30-year fixed mortgage rates to compile a five-year forecast:

Read about when mortgage rates will go back down to 6%.

Of course, these are long-range estimates based on historical norms and broad expectations. All of these numbers could be thrown out the window if any of the following happens:

10-year Treasurys outperform or underperform the forecast. For example, yields could crash in a severe economic setback, such as a recession.

The spread between Treasurys and mortgage rates narrows — or dramatically expands.

Monetary policy, as driven by the Federal Reserve, substantially changes.

There is no forecast that predicts a 3% mortgage rate in the next five years. However, who saw such low home loan rates on the horizon in 2007 when rates were about where they are now? Things like the Great Recession and a global pandemic are rarely on the radar, and such drastic events are what it takes to move mortgage rates into the cellar.

The analysis above predicts 2027 mortgage rates to be around 6.2% to 6.4%.

Based on the estimates above, mortgage rates are not expected to drop significantly in the next five years. However, a recession or other unknown disruption to the economy (such as a financial collapse or pandemic) could change the outlook.

If you are considering an adjustable-rate mortgage with an initial fixed-rate period, you'll first want to consider how long you'll actually remain in the house you are financing. Then the long-term mortgage rate forecasting begins. The best approach is probably to select the initial term that best suits your current budget.

Laura Grace Tarpley edited this article.

Bad news for the economy can be good news for mortgage rates, and nobody's disputing it: We've got bad news. The government shutdown is now the second-longest in history, and for the most part, the 10-year Treasury yield has been declining. Here's what that means for mortgage rates.

Learn about how the government shutdown impacts your money, from loans to Social Security.

The 10-year Treasury note, a debt instrument issued by the U.S. government, moves in tandem with mortgage rates, with a roughly two-percentage-point spread between them. For example, if the 10-year yield is near 4%, mortgage rates will likely be near or slightly above 6%.

Lately, the 10-year has been dipping below 4%.

Chris Whalen is the chairman of Whalen Global Advisors LLC and an investment banker focusing on mortgage finance and financial services.

"The 10-year gets pulled down for a lot of reasons, some because of the friction like government shutdowns," Whalen told Yahoo Finance in an email. Mortgage rates have been falling since July, he said, "but that was all done by aggressive lenders, not markets."

Whalen isn't expecting anything drastic to happen in the mortgage markets during the shutdown. The Federal Housing Administration (FHA) stopped processing certain new loans, which delays financing — but that's about it.

However, Cotality chief economist Dr. Selma Hepp believes a government shutdown can shape investor sentiment and limit access to key economic data. The result: possible lower mortgage rates.

"When shutdowns occur, investors typically flock to Treasury securities, which pushes their yields down and can result in slightly lower mortgage rates — usually a drop of about 0.125 to 0.25 percentage points,” Hepp told Yahoo Finance via email. “For instance, if the 30-year fixed mortgage rate is sitting at 6.375%, it might fall to around 6.125% during the shutdown."

Dr. Hepp admitted that other market factors can alter those expectations, including the interruption of vital economic reports the Federal Reserve counts on to set monetary policy, such as gauges of employment and inflation.

With so many variables in play — the economy, a transitioning housing market, and the duration of the shutdown — it's challenging to predict how the bond market will react.

According to Zillow data, mortgage rates have inched down 17 basis points since the shutdown. Obviously, that's not enough to trigger a home-buying frenzy or a refinancing boom, but depending on how long the shutdown lasts, those gradual declines could add up to a more significant drop.

Discover how the national debt impacts mortgage rates.

After the government shutdown is over, the nation will still face growing economic uncertainty.

Mike Fratantoni, chief economist for the Mortgage Bankers Association, told Yahoo Finance via email that ADP's report indicating 32,000 job losses in September amplifies concerns about a weakening job market.

"And this is particularly the case as we are unlikely to get BLS job market numbers, given the shutdown, so the ADP number increases in importance," Fratantoni added.

Realtor.com's Chief Economist Danielle Hale has predicted that mortgage rates will continue a slow drift downward following the government shutdown, though there are many variables impacting that forecast.

Her colleague has highlighted the difficulties in the housing market.

"A government shutdown adds uncertainty into a housing market that is already under pressure from high home prices and elevated mortgage rates," Anthony Smith, Realtor.com's senior economist, said in an analysis.

"Anything that further discourages prospective buyers from entering the market and risks slowing sales even more in a slow housing market is not helpful," he added.

Fratantoni noted that the bond market continues to "bounce back and forth between being more focused on the job market versus inflation. Both metrics are bad news lately, but they push rates in opposite directions."

However, watching the bond market will provide a clue to the direction of mortgage rates, he added. "Lower 10-year Treasury rates typically do lead to lower mortgage rates.”

Read about how to get the lowest mortgage rate possible.

If, after diligently shopping for a mortgage lender, you're poised and preapproved to buy a house, locking in your mortgage rate on a dip is always the goal.

However, it’s difficult to lock in a mortgage rate when they’re down because rates vary by the hour. Once you hear of a lower mortgage rate, the chance to lock it in may have already passed.

It's not worth the stress to improve your interest rate by a couple of basis points, or worth the worry if your rate rose by some incremental amount.

If you have a longer runway before landing a home, understanding mortgage rate trends can be very helpful. Tracking 10-year Treasury yields can help.

Laura Grace Tarpley edited this article.

It's probably the first question that comes to mind in the homebuying process: How much house can I afford? However, with the metrics for affordability currently all but outmoded, traditional advice may be difficult to trust. Here are ways to determine how much house you can afford.

Read more: The best mortgage lenders for first-time home buyers

One often-cited metric of home affordability is housing costs amounting to no more than about one-third of your monthly income.

The guideline is the 28/36 rule: Your house payment, taxes, insurance, and homeowners’ association dues should total no more than 28% of your pretax monthly income. The 36% encompasses all monthly debt, including housing expenses.

In a June affordability analysis, Realtor.com said:

"Spending roughly 30% or less of your pretax income on housing is expected to leave room for other non-negotiables, as well as savings … Just three metros, all located in the Midwest, are affordable for the typical household in the area using a 30% benchmark for housing costs as a share of income. This means that 47 of the top 50 metros missed the mark."

That's just three cities out of 50. That makes the 28/36 rule practically irrelevant these days. However, there is a rule-breaking factor to consider that we'll get to soon.

Learn more: What salary do you need to afford a $1 million home?

It makes sense to run the numbers based on your current income, debt, savings, and several mortgage loan options. A housing affordability calculator does just that. It expands on the debt-to-income ratio, which compares your monthly debt payments to your gross monthly income.

The real numbers bring affordability into focus. Based on the results and your home-buying goals, you can set a plan in place to reduce debt, save more for a down payment, and even determine a workable mortgage rate that you can afford.

To calculate your debt-to-income ratio, divide your total monthly debt by your monthly income before taxes and other deductions. Here's an example based on an income of $5,000 per month and total debt payments of $1,800 per month.

1800/5000 = 0.36

The calculation shows a DTI of 36%. Remember the 28/36 rule above? You're one of the lucky ones, right on the mark for the 36% all-debt ratio.

However, if you put those numbers into the Yahoo Finance “How Much House Can I Afford” calculator, you may be disappointed with the value of the home you can afford for the down payment you have saved.

Remember the rule-breaking factor we promised above? Here it is: Lenders make big concessions regarding your DTI ratio.

Learn more: 8 strategies for buying a house with a low income

Mortgage lenders abide by the rules of Fannie Mae and Freddie Mac, the government-sponsored enterprises that provide liquidity to the mortgage market. Fannie and Freddie will underwrite loans to borrowers with DTI ratios as high as 45% to 50%. That gives borrowers much more wiggle room than a 36% DTI ratio.

However, you have to decide if such leniency is right for your long-term financial health.

Buying a house while owing more than the 28/36 debt rule allows is feasible, but it might put you under financial pressure. However, if you have a steady — and growing — income, you're reducing debt at a rapid clip, and you're willing to cut back on discretionary spending, it can be accomplished.

You'll also want to know that both Fannie and Freddie allow lenders to accept down payments as low as 3% rather than the traditional 20% down. FHA loans, which only require 3.5% down, can also be an option for some modest-income and low-down-payment borrowers.

Again, it's a matter of deciding what's best for you and your long-term money situation.

Learn more: The best low- and no-down-payment mortgage lenders

It’s time to sit down, do the math, and contemplate. Ask yourself the following three questions:

How much rent do you pay now? Is it comparable to the monthly payment on a house you would want to buy? Check a mortgage calculator.

How much debt do you carry? Are you significantly reducing the load? Adding a large monthly mortgage payment could be a financial strain. But if you’re close to paying off other debt, you might be ready to buy a house.

How is your monthly cash flow? Are you living month-to-month with little to nothing left over? If so, buying a house may need to wait.

According to Realtor.com's August Buying Power Report, only 28% of houses on the market are affordable for a typical American household. That's based on Realtor.com's "maximum affordable home price" of $298,000 for a median-income home buyer.

Several factors can make homeownership more affordable. They are out of your control, but worth keeping up with.

It goes without saying: Lower mortgage rates could boost affordability. For every half point that home loan rates drop, you save money now (on your monthly payment) and later (on the total interest you pay). Here's an example:

It's worth monitoring mortgage rate trends and factors that influence them, such as inflation, jobs reports, the Federal Reserve, and the 10-year Treasury yield.

Dig deeper: When will mortgage rates go back down to 6%?

Home prices are moderating. That can really help affordability.

"While prices were up from a year ago, the rate of gain is slipping as rising ownership costs and increasing inventory are pulling prices down in many markets. The share of markets posting annual decreases in the home price index has steadily increased this year. It reached 19% in May, a share not seen since 2012,” Cotality’s Chief Economist, Dr. Selma Hepp, said in an analysis published in July.

A higher credit score could land you a lower mortgage rate. A lower interest rate translates to a lower monthly payment.

To really get a sense of whether you can afford a $400,000 house, go through the steps outlined above. However, for a quick estimate, multiply your income by three to five. So, for a $400,000 house, a $100,000 annual salary might be sufficient. Might.

It's on the upper scale of the three-to-five-times annual salary estimate, so it could be possible. The real answer will depend on your debt load, down payment, and monthly cash flow.

This could work. To quickly figure out how much house you can afford with a $70,000 salary, multiply $70,000 by three to five. Three to five times your salary would give you a potential affordability range of $210,000 to $350,000.Now hit the mortgage calculator to confirm.

Laura Grace Tarpley edited this article.

Mortgage rates are significantly higher than their sub-3% lows from 2021, but compared to the 1980s, they’re pretty low. Understanding historical mortgage rate trends can help you make a more informed home-buying decision — and maybe lift a weight off your shoulders when you realize that, historically speaking, today’s interest rates aren’t as high as you might think.

MORE: See our top picks for mortgage lenders for first-time home buyers.

Congress established Freddie Mac in 1970 to expand the secondary mortgage market. Freddie Mac began tracking rates in April 1971.

The average annual rate on a 30-year fixed-rate mortgage reached its highest point at 16.64% in 1981 and dropped to a historic low of 2.96% in 2021. At the time of publication, the average rate sits in the low-to-mid-6% range.

Here’s a closer look at home interest rates over time.

Find out when mortgage rates could go back down to 6%.

Lowest annual average mortgage rate: 7.38%

Highest annual average mortgage rate: 11.20%

Mortgage interest rates rose steadily from the mid-7% range to roughly 9% in the 1970s. Buyers saw a significant jump to over 11% by the decade's end.

The Great Inflation caused the incline, a period marked by record-high inflation. It spanned from the mid-1960s to the early 1980s and was triggered by the Fed’s monetary expansionary policies.

Read about whether mortgage rates could go back up to 7%.

Lowest annual average mortgage rate: 10.19%

Highest annual average mortgage rate: 16.64%

The upward trend continued into the 1980s, and average mortgage rates reached an all-time high of 16.64% in 1981. The Organization of the Petroleum Exporting Countries (OPEC) issued an oil embargo against the U.S. in the 1970s, and in response, the Fed slashed and increased short-term rates many times throughout the 80s.

By the mid-1980s, the average rate started to drop and closed out at 10.32%

Lowest annual average mortgage rate: 6.94%

Highest annual average mortgage rate: 10.13%

Home buyers got a bit of relief in the 1990s. Mortgage rates cooled to just below 7% in 1998, then rose slightly to an average of 7.44% in 1999. Borrowers could thank the dot-com bubble and the rise of the internet for the drop in rates.

More specifically, investors moved away from tech stocks and toward bonds and other fixed-income investments, pushing mortgage rates down.

Lowest annual average mortgage rate: 5.04%

Highest annual average mortgage rate: 8.05%

Mortgage rates peaked at 8.05% in the early 2000s before dropping to 5.04% by 2009. The culprits were the economic crash and the subsequent Great Recession. Both stemmed from astronomical growth in the housing market, mainly due to the influx of subprime borrowers.

The mortgage payments became too much for these borrowers to handle. Many found themselves underwater on their mortgage loans, and the housing market eventually crashed.

A wave of foreclosures followed, prompting the Fed to cut rates and stabilize the market. This is the perfect example of the general rule that mortgage rates decrease when the economy struggles.

Learn about when the housing market may crash again.

Lowest annual average mortgage rate: 3.65%

Highest annual average mortgage rate: 4.69%

Mortgage rates remained low this decade. They temporarily reversed course in 2014 and again in 2018, with average rates at 4.17% and 4.54%, respectively — still four times lower than the all-time high.

The decade ended with an average mortgage rate just below 4%.

Lowest annual average mortgage rate: 2.96%

Highest annual average mortgage rate: 6.81%

The COVID-19 pandemic ushered in record-low rates, largely due to the Federal Reserve cutting the federal funds rate to make borrowing attractive again. Unfortunately, these enticing rates were short-lived, as the Fed followed up its actions with several rate hikes between March 2022 and July 2023.

Rate hikes made home loans more expensive. The average spiked to 5.54% in 2022, followed by another increase to 6.81% in 2023. A rate cut in September 2024 caused the rate to dip to 6.72% that year.

Despite these changes in recent years, rates haven’t returned to their pre-pandemic levels and are among the highest since 2002. It would take a drastic event (along the lines of the COVID-19 pandemic) to cause home loan rates to plummet back to the 3% range.

Read about what happens if mortgage rates go up to 8%.

Mortgage rates can fluctuate daily. Multiple factors affect mortgage interest rates, and here are some of the most common:

Federal funds rate: Mortgage rates typically decrease in the weeks before an anticipated Fed rate decrease and increase before a Fed rate increase.

10-year Treasury yield: Because mortgages are longer-term loans, their rates follow the 10-year Treasury yield’s movements even more than shorter-term yields (like the fed funds rate).

Inflation: You’ll usually see mortgage rates increase when inflation rises more aggressively than economists expect.

Global events: Investors’ perceptions of events like the U.S. presidential election or tariffs imposed on other countries can impact home loan rates either way.

Economic conditions: Mortgage interest rates usually go up when the economy thrives and down when the economy struggles.

Job market: Since the job market is part of the overall economy, rates tend to rise when the job market is doing well.

Home-buyer demand: The more demand in the housing market, the higher the rates.

These are factors you can't control. However, a mortgage lender may give you a better interest rate if your personal finances are strong.

Learn how the Federal Reserve rate decision impacts mortgage rates.

A mortgage lender’s advertised rate may not be the one you receive. It depends on several personal factors, including your credit score, down payment, debt-to-income (DTI) ratio, and cash reserves (if applicable).

The type of mortgage loan you get also plays a role in the mortgage rate you’re offered. For example, VA loans often have lower interest rates than conventional loans.

When rates are low, homeownership becomes more attractive, driving up demand. Home prices also follow suit as more prospective buyers hit the market.

Still, lower borrowing costs mean access to more buyer power and lower monthly mortgage payments. Keep in mind that the lowest mortgage rates are generally reserved for well-qualified borrowers with strong credit scores.

When will mortgage rates go down? Take a look at the 2025 and 2026 rate predictions.

Refinancing a mortgage makes sense when rates drop, but only if you qualify for a better deal. It isn’t a hard-and-fast rule, but many say you should consider refinancing if you can secure a rate reduction of at least 1%.

If you plan to move soon, though, the costs of refinancing could outweigh the long-term benefits.

Mortgage rates fluctuate with economic conditions, and there’s no surefire way to time the market or predict when rates will shift. Ideally, you want to purchase when rates are low to keep borrowing costs in check. However, buying a home is not necessarily a bad idea when rates are higher if your finances are in solid shape.

Current rates haven’t returned to the pre-pandemic levels. Still, they remain well below the record highs in the late 1970s, 1980s, and 1990s. And if you decide to buy a home before rates drop, refinancing into a lower rate later is always an option — provided your finances are up to par.

Want to buy a house before the end of 2025? Here’s what you should know.

Inflation and Fed rate hikes in recent years have kept mortgage rates elevated. However, even though mortgage rates may seem very high, they’re low compared to the rates of the 1970s, 1980s, and 1990s.

As of September 2025, the average mortgage rate on a 30-year fixed-rate loan is in the low-to-mid-6% range. Any rate around or below this number could be considered “good.”

According to Freddie Mac, the lowest average weekly rate on a 30-year fixed mortgage was 2.65% in 2021 due to a Fed rate cut prompted by the COVID-19 pandemic. The cut was made to address economic uncertainty and persuade consumers to increase spending and borrowing levels, aiming to stimulate the economy.

Laura Grace Tarpley edited this article.