Can mortgage rates go even lower?

Didier Malagies • September 10, 2024


Mortgage rates have made almost a 2% move lower from the highs of 2023. Now that the jobs week data is in, the question is: can mortgage rates go even lower? The answer is yes, but we will need more economic weakness, better spreads and a more dovish Fed. While the Fed can be old and slow, the bond market, thankfully, is doing a lot of the heavy lifting and has already priced in a lot of Fed easing policy.

Let’s take a look at 2024 and see how much lower we can go. 


10-year yield and mortgage rates


My 2024 forecast included:

  • A range for mortgage rates between 7.25%-5.75%
  • The 10-year yield between 4.25%-3.21%

Considering my forecast, we are getting closer to the downside limits on mortgage rates. This is happening as the spreads are better and the labor market is getting softer. However, to take the 10-year yield toward 3.21% and possibly see rates below 5.75%, we will need two things:


1. The economic data needs to weaken, especially the labor market data. I wrote about the recent jobs report and talked about jobs week here. Weaker labor data can push the 10-year yield lower as the bond market will tell the Fed they’re behind the curve. Once the Fed starts cutting rates more aggressively and sounding more dovish, this will give a more straightforward path for yields to fall. However, this requires more labor and economic weakness as the Fed is stubborn about rate cuts — which is why we have had zero up to today.


2. A stock market correction at this point in the cycle can trigger a flight to safety, meaning that money can go into bonds if people sell stocks because they believe that corporate profits are about to get hit due to an economic recession.

The bond market has shown the ability to break below the bottom line of 3.80%, as three of the four jobs reports last week were negative. However, we will need to see more economic weakness for this to continue.


Mortgage spreads

Another way for mortgage rates to drop to the lowest level of the forecast or below is to improve mortgage spreads. Because the 10-year yield has already fallen so much, spread improvement must do some of the heavy lifting to reach 5.75% or below.



Mortgage spreads were a negative storyline in 2023, as the collapse of Silicon Valley Bank and the resulting banking crisis pushed them to new cycle highs. We haven’t had any banking crisis events this year, and the Federal Reserve is starting its rate-cut cycle soon. Over time, with more rate cuts, the spreads should improve, which can push mortgage rates lower without assistance from a falling 10-year yield.



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