"Bank of America's mortgage-backed securities (MBS) research team tackled the question of when U.S. mortgage rates could come down. President Donald Trump has been pressuring the Federal Reserve for much of 2025 to cut interest rates, even as Fed chair Jerome Powell cites rising inflation related to tariff policy and macroeconomic uncertainty as a reason to be careful. But mortgage rates remain elevated above 6%, freezing activity in the housing market that enjoyed a tremendous boom during the pandemic thanks to sub-3% mortgage rates."
"The MBS team wrote on Tuesday it "does see a path to a 5% mortgage rate" as long as the Fed pulls off two actions: quantitative easing (QE) in mortgage-backed securities and aggressive yield-curve control to the point that 10-year Treasury yields come down to 3.00%-3.25%. The 10-year is pivotal since it serves as a benchmark for 30-year fixed mortgage rates."
"Per the Bank of America Research "Situation Room" note released Sept. 16, the baseline expectation is for mortgage rates to end both 2025 and 2026 at 6.25%-a moderate decline from the current national average near 6.35%, which BofA notes was a big improvement from 6.9% recently. That's based on a 10-year Treasury yield of about 4.00% and about 4.25% by year-end 2026."
U.S. mortgage rates sit above 6%, severely limiting housing market activity after pandemic-era sub-3% rates. Bank of America MBS research projects a baseline of 6.25% for year-end 2025 and 2026, assuming 10-year Treasury yields around 4.00% now and roughly 4.25% by late 2026. A credible route to 5% mortgage rates requires Federal Reserve quantitative easing in mortgage-backed securities and aggressive yield-curve control to drive 10-year yields to 3.00%–3.25%. Even a decline to 5% would likely not eliminate the intense affordability squeeze facing American homebuyers. A flight-to-safety or recession could further reduce yields.
Read at Fortune
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