Mortgage rates have barely changed over the past few weeks — but what about long-term rates? Where will interest rates go in the next five years? Should you wait for mortgage rates to drop before buying or refinancing? Mortgage rates are determined by several factors, all of which can give us clues about the future.
One of the most useful indicators for predicting mortgage rates is the ten-year Treasury note yield. Mortgage rates and 10-year Treasury yields generally move in the same direction, although mortgage rates are typically higher as lenders factor in additional risk. The difference between the two is called the spread, and we take it into account when estimating where mortgage rates are likely to go.
With that in mind, the first step is to understand where economists think Treasury yields will go over the next five years. To make our forecasts, we will combine expert economic forecasts with data compiled by artificial intelligence.
Michael Wolf, global economist at Deloitte Touche Tohmatsu Ltd., outlined the firm’s Treasury yield expectations over the next five years in a December update from Deloitte Global Economics.
“We assume the Fed keeps rates on hold until December 2026. The average federal funds rate will reach neutral at 3.125% by mid-2027,” he wrote. Wolf said the 10-year Treasury yield will gradually decline in the second quarter of 2027, “stable at 3.9% from the third quarter of 2027 to the end of 2030.”
Let’s graph this prediction.
Other forecasts point to a rise in long-term yields. For example, Goldman Sachs analysts expect that over the long term, the 10-year Treasury note rate will rise to 4.5% by 2035.
At the same time, the U.S. Congressional Budget Office (CBO) predicts that the 10-year Treasury bond yield will reach 4.1% by the end of 2026, gradually rising to around 4.3% by 2030.
Anthropic’s Claude AI compiles these predictions into consensus predictions, which we will use below.
Read more: Why mortgage rates will rise after the Fed cuts rates
As mentioned earlier, there is a spread between the 10-year Treasury bond rate and the 30-year fixed mortgage rate. In recent years, the gap between the two has been around 2.5 percentage points. That’s a significant change from spreads from 2010 to 2020, when they were less than two percentage points and typically closer to 1.5 percentage points.
Using a spread of 2 percentage points, here is an example of how Treasury rates compare to mortgage rates:
10-year Treasury bond interest rate = 4%
Spread = 2 percentage points
Mortgage rate = 6%
A recent example: As of March 5, the 10-year Treasury yield was 4.09% and the 30-year fixed mortgage rate was 6.00%. The spread is 6.00 – 4.09 = 1.91 percentage points.
The spread is less than two percentage points, which is one reason mortgage rates are falling.
Claude AI recommends using variable propagation with slow compression:
“The spread between the 30-year fixed mortgage rate and the 10-year Treasury note is driven by prepayment risk, credit risk, and the supply and demand of mortgage-backed securities (MBS). The Fed’s quantitative tightening (QT) program widened the spread after 2022 as the private market absorbed more MBS. Spreads have begun to normalize in late 2025 and are expected to continue to tighten.”
Using these spread estimates, we can now complete a five-year mortgage rate forecast.
Using Treasury forecasts, we add Crowder’s recommended base case assumption spread between the bond market and 30-year fixed mortgage rates to compile a five-year forecast:
Read more: When will mortgage rates fall back to 6%?
While this forecast is for a base case of gradual normalization of interest rate spreads, moderating inflation, and moderate Fed monetary policy, Claude AI has also prepared a “bull” estimate and a “bear” estimate:
Bull Case: Soft Landing
“The Fed successfully guided inflation back to 2% without a severe recession. As term premiums compressed, the FOMC gradually cut rates through 2027, pulling the 10-year Treasury yield to 3.3%. As the QT ended and private MBS demand recovered, MBS spreads normalized to the long-term average of 170 basis points. The result: 30-year fixed rates near 5.00% by 2030.”
Bearish case: persistent inflation and fiscal pressures
“Inflation remains above 2.5%, and the growing U.S. fiscal deficit has pushed up term premiums, keeping 10-year Treasury yields near 4.4% to 4.6%. Spreads have widened to 240 basis points as market volatility and MBS supply weigh on the secondary market. Mortgage rates will climb to 7.00% by 2027, then ease slightly to 6.60% by 2030.”
Of course, these are long-term estimates based on historical norms and broad expectations. All those numbers could go out the window if any of the following happens:
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The 10-year Treasury note has performed better or worse than forecasts. For example, yields may plummet during a severe economic setback, such as a recession, or surge when government deficits are growing.
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The spread between U.S. Treasury and mortgage rates narrowed — or widened dramatically.
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Monetary policy has undergone significant changes driven by the economy.
There is no prediction that this will happen in the next five years. However, who would have foreseen such low home loan rates in 2007, when rates were comparable to where they are now? Things like the Great Recession and a global pandemic get little attention, and dramatic events like these are exactly what cause mortgage rates to drop.
The above analysis predicts that mortgage interest rates will be close to 6% in 2027.
According to the above forecast, the next five years. However, a recession or other unknown economic disruption, such as a financial collapse or another pandemic, could change the outlook.
If you’re considering an initial fixed-rate term, you’ll first want to consider how long you’ll actually stay in the home you’re financing. Then begin the long-term mortgage rate forecast. The best approach may be to choose an initial term that best fits your current budget.
Read more: 8 Strategies to Get the Lowest Mortgage Rate
