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What Will Mortgage Rates Be Like in 10 Years?



Loan officers hear the question, “What are rates doing today?” probably more than any other, especially if interest rates are in the news. Homeowners who are considering refinancing or someone thinking about buying a home and getting a new mortgage will be rate sensitive. Especially so if they hear the Fed has lowered or raised rates or left them the same at the last Board meeting. And loan officers are quick to answer. And the next question might then be, “What are rates going to do?” That’s where loan officers give pause, because no one really knows what rates are going to do. There are so many factors involved that it’s more of an educated guess rather than anything to do with a crystal ball. But what about mortgage rates well into the future, say like in 10 years?

Okay, we’ll tackle that one. But it’s really more of looking back 10 years and comparing then to what might happen in 2027. In August 2007, the national average for the 30 year mortgage was 6.57%. Today, we’re closer to 4.00%, this according to Freddie Mac’s mortgage rate survey. That’s a drop of a bit more than 2.50%. Will rates continue to fall by 2.50% or will they rise to levels seen back in 2007? That’s doubtful. If anything, rates will likely stay in a relatively tight range. Why? Because the mortgage industry is drastically different than it was leading up to 2007.

In the early to mid-2000s, mortgage lenders tried to outdo one another with exotic loan programs. Lenders lowered their standards by approving loan applications with very low credit scores. They didn’t document income, employment or assets in the bank. These so-called “toxic” loans permeated the marketplace to the point where lenders went out of business because they never verified the borrowers could make the monthly payments. Borrowers instead relied on “flipping” houses for a quick profit but that bubble popped in a big way.

Today, such loan programs no longer exist. Instead, loans issued today follow specific guidelines that require lenders to verify income, employment, assets and have the borrowers demonstrate an ability to repay a debt on every single conforming conventional loan issued. That creates stability in the marketplace. There are external factors such as geopolitical events that can affect interest rates that can’t be predicted, but that aside, if we had to take a guess, we’d say rates will be relatively stable over the next 10 years.

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