re: Primary Mortgage Interest Rates - Future Outlook

It’s really a crystal ball when it comes to predicting future rates.

One misconception is that mortgage rates are tied to the Federal funds rate. The Federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis.

Mortgages are more closely aligned with long term treasuries. A good rule of thumb is to add 200 basis points to the long term treasury rate to estimate 30 year mortgage rates.

Take today’s 10-year or 30-year treasury yield (currently around 2.7%), add 200 basis points, and viola! That’s our current mortgage rates (4.7%).

So your mortgage rate in 9 months is going to depend on how the economy does the next few quarters. Modest economic activity, and rates shouldnt rise much. If things take-off like gangbusters and the yield curve steepens, mortgage rates will definitely go up (regardless what the Fed does or doesnt do).