Mortgage rates have been higher in the last few years, but a new forecast suggests the 30-year fixed loan may not fall in a straight line. The path depends first on the 10-year U.S. Treasury note and then on the gap lenders add on top of it.
That is why borrowers searching for Fannie Mae now are looking at Treasury forecasts, not just mortgage headlines. Michael Wolf, a global economist at Deloitte Touche Tohmatsu Ltd., wrote in a December update from the Deloitte Global Economics Research Center that the Fed leaves rates unchanged until December 2026 and that the average federal funds rate reaches its neutral 3.125% in the middle of 2027. He said the 10-year Treasury yield will ease gradually through the second quarter of 2027 before settling at 3.9% from the third quarter of 2027 through the end of 2030.
The mortgage market usually moves in step with Treasury yields, but not perfectly. Mortgage rates are usually higher because lenders build in extra risk, and in recent years the spread between the 30-year fixed mortgage rate and the 10-year Treasury has been on either side of 2.5 percentage points. From 2010 to 2020, that spread was under two percentage points and often near 1.5. On March 5, the 10-year Treasury yield was 4.09% while the 30-year fixed mortgage rate was 6.00%, a spread of 1.91 percentage points.
That smaller gap matters because it gives room for mortgage rates to fall even if Treasury yields do not move sharply lower. Using a variable spread that slowly compresses, the estimate points to mortgage pricing drifting down as the spread tightens toward the levels seen before the recent run-up. Claude AI, which compiled the forecasts into a consensus view, said the spread is driven by prepayment risk, credit risk and supply and demand for mortgage-backed securities, and that the Federal Reserve's quantitative tightening widened spreads after 2022 as private markets absorbed more MBS.
That same consensus view also points to the friction in the long-range outlook. Goldman Sachs expects the 10-year Treasury to rise to 4.5% by 2035, while the Congressional Budget Office sees it reaching 4.1% by the end of 2026 and about 4.3% by 2030. Wolf's path is lower than both in the later years, which would keep pressure off mortgage rates if spreads keep normalizing as they began to do in late 2025.
For borrowers, the message is not that mortgage rates are headed back to the ultra-low era. It is that the next move is more likely to come in steps than in a clean break, and the benchmark to watch is still the 10-year Treasury. If Wolf is right, the next big checkpoint comes in December 2026, when the Fed is still on hold and the mortgage market has to decide whether the slower compression in spreads is enough to pull borrowing costs meaningfully lower.
