Mortgage rates may fall over the next five years, but they could also go back to 7%. A main forecast expects the average 30-year fixed mortgage rate to be around 6.05% in 2027.
But there is also a risk that rates could rise to around 7% by 2027. Rates could slowly fall after that. This could happen if inflation remains high and the US government keeps borrowing more money, pushing bond yields higher.
Artificial intelligence was used to estimate how the spread could change. Anthropic’s Claude suggested that the spread could gradually narrow as Federal Reserve quantitative tightening, or QT, winds down and demand for mortgage-backed securities improves. But the bear case gives a very different picture. Yes — but that is the bear-case scenario, not the main forecast. Rates could fall again after that.
That means the main forecast does not expect mortgage rates to return to 7% by 2027. Instead, it expects rates to remain close to 6% and then gradually move lower. If inflation remains above 2.5% and large U.S. government deficits push Treasury yields higher, the 10-year yield could stay around 4.4% to 4.6%. A wider mortgage spread could push rates back to 7%. Under this scenario, 30-year mortgage rates could climb to around 7% by 2027. The bear case does not expect 7% rates to last forever. Under that scenario, mortgage rates could ease to about 6.60% by 2030 after reaching around 7% in 2027. The bull case could bring the 30-year mortgage rate close to 5% by 2030. This would happen if the mortgage spread returns closer to its long-term average of about 1.7 percentage points, while demand for mortgage-backed securities improves. So, could mortgage rates hit 7% again by 2027? The base case points to a rate of about 6.05% in 2027, while the downside scenario sees rates reaching around 7% if inflation and fiscal pressures remain strong. In the main forecast, mortgage rates are expected to stay near 6% in 2027. They could then slowly fall to around 5.7% by 2030. However, if inflation stays high and Treasury yields rise, mortgage rates could go back up to around 7% in 2027.
Because of market volatility and mortgage-backed securities supply pressures, claude’s bear-case estimate assumes the spread could widen to about 2.4 percentage points.
