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In-Depth Analysis of the 30-Year Conventional Mortgage Rate Trends and Projections

Exploring the Dynamics of Mortgage Rates from 2019 to 2029

The landscape of the 30-year conventional mortgage rate has undergone significant changes over recent years. As we delve into the data, provided primarily by Freddie Mac's Primary Mortgage Market Survey, we see a complex interplay of economic factors shaping these trends. This report presents an annual overview, derived from monthly averages that are weighted equally.

Projection for 2024: A notable increase is anticipated in the 30-year conventional mortgage rate, reaching an estimated value of 5.96%. This represents a substantial growth of 202 basis points over the five-year period ending in 2024, including a remarkable 80.2% surge in 2022 alone.

Average Growth from 2019-2024: The average annual growth rate during this period is pegged at 8.63 percentage points.

Forecast for 2029: Looking further ahead, the 30-year conventional mortgage rate is projected to climb to 6.70%, marking an increase of 74 basis points over the next five-year period.

Average Growth from 2024-2029: The average annual growth rate for this period is estimated at 2.37 percentage points.

Current Market Dynamics: The majority of mortgages are bundled and sold as securities in secondary markets. These rates typically align with the yields of other fixed income securities, like Treasury notes, adjusted for factors like risk, term length, and liquidity. Mortgage rates are influenced by inflation expectations, changes in investor risk appetite, and returns on various asset classes.

Historical Context: In 2012, mortgage rates saw a sixth consecutive year of decline, dropping to 3.66%. This trend continued until 2015, with rates occasionally rising above 4.0%. The Federal Reserve (Fed) played a crucial role, raising rates several times between 2016 and 2019 but reversing course in 2019 amid economic uncertainty. The onset of COVID-19 in early 2020 led the Fed to slash rates to nearly 0%, impacting mortgage rates.

Future Outlook: As economic conditions improved, the Fed had to adjust its monetary policy to address rising inflation, leading to multiple aggressive rate hikes in 2022 and 2023. Although the Federal Reserve has indicated a steady approach going forward, mortgage rates are expected to remain high, closely tied to the Prime Rate. The 30-year fixed rate mortgage, being the most common loan type for home purchases in the US, is thus projected to experience an upward trajectory in the coming years.

In summary, the 30-year conventional mortgage rate has been subject to a range of economic forces, from Federal Reserve policies to broader market dynamics. As we move towards 2029, the rates are expected to continue their ascent, influenced by inflationary trends and monetary policies.

Source: MMCG, IBISWorld

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