The Top Indicator if You Want To Know Where Mortgage Rates Are Heading

Mortgage rates have increased significantly since the beginning of the year. According to Freddie Mac, the average 30-year fixed rate mortgage has risen from 3.22% at the start of the year to 3.55% as of last week. This is important to note because any increase in mortgage rates changes what a purchaser can afford.

While it’s always difficult to know exactly where mortgage rates will go, a great indicator of where they may head is by looking at the 50-year history of the 10-year treasury yield, and then following its path. There’s a correlation in how it moves and how mortgage rates follow.

With this information in mind, a 10-year treasury yield forecast would be a good indicator on where mortgage rates may be headed. The Wall Street Journal just surveyed a panel of over 75 academic, business, and financial economists asking them to forecast the treasury yield over the next few years. The consensus was that experts project the treasury yield will climb to 2.84% by the end of 2024. Based on the 50-year history of following this yield, that would likely put mortgage rates at about 4.5% in three years.

While the correlation between the 30-year fixed mortgage rate and the 10-year treasury yield is clear, it shouldn’t be used as an exact indicator. They’re both hard to forecast, especially in this unprecedented economic time driven by a global pandemic. Yet understanding the relationship can help you get an idea of where rates may be going. It appears, based on the information we have now, that mortgage rates will continue to rise over the next few years. If that’s the case, your best bet may be to purchase a home sooner rather than later, if you’re able.

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