Mortgage rates near 7% as 10-year yield falls below 5%

HousingWire reported that housing demand has stabilized recently as mortgage rates moved closer to 7%, following the 10-year Treasury yield falling below 5%. This development has created a clearer path for mortgage rates to drop below 7%.

During October, there was concern that the 10-year yield might close above 5.35%, which could have pushed mortgage rates above 8%. However, the yield held below this key level, preventing such an increase.

The report explains that if certain conditions occur—such as resolution of the Iran conflict, stable oil prices between $67 and $82, and a slowdown in AI growth—mortgage rates could fall below 7%. Conversely, if the AI sector rebounds, conflicts persist, or trade tensions worsen, rates could remain above 7%.

Since September 10, a head-and-shoulders pattern has formed in the 10-year yield, suggesting potential for rates to break lower. HousingWire notes that mortgage demand improves significantly when rates drop below 6.64%.

The Federal Reserve's tighter policy has impacted some AI companies financially, contributing to the recent decline in the 10-year yield despite firm economic data and elevated oil prices.