Bank of America’s outlook for mortgage rates in 2023 and 2024Bank of America has recently released a report on its outlook for mortgage rates in the next few years. According to their researchers, mortgage rates are expected to drop to 5.25 percent by the end of 2023. This prediction is based on the assumption that mortgage rates will peak in 2022, meaning that 2023 and 2024 would see a gradual decrease in rates. This forecast may be good news for prospective homebuyers who have been grappling with higher mortgage rates in recent years.
Historical context of 30-year mortgage rates and 10-year Treasury yieldTo better understand the forecasted mortgage rate trends, it is helpful to look at the historical context of 30-year mortgage rates and 10-year Treasury yield. The 30-year mortgage rates are usually based on the 10-year Treasury yield, which is often referred to as the benchmark yield. Historically, the 30-year mortgage rates have been higher than the 10-year Treasury yield, with the spread between them being as high as 2.5% at times. However, in recent years, this spread has been narrowing, with the average spread being around 1.8%.
Factors influencing mortgage ratesSeveral factors affect mortgage rates, including the state of the economy, inflation, and the actions of the Federal Reserve. During periods of economic growth and low inflation, mortgage rates tend to be relatively low compared to periods of recession and high inflation. The Federal Reserve also has the power to influence mortgage rates through its monetary policy, such as its interest rate decisions. When the economy is doing well, the Federal Reserve may increase interest rates to prevent inflation, which would drive up mortgage rates. Some other factors that could affect mortgage rates include:
- The supply and demand for mortgage bonds
- The geopolitical climate
- The housing market trends