Bank of America’s mortgage-backed securities (MBS) research team tackled the question of when U.S. mortgage rates could come down. President Donald Trump has been pressuring the Federal Reserve for much of 2025 to cut interest rates, even as Fed chair Jerome Powell cites rising inflation related to tariff policy and macroeconomic uncertainty as a reason to be careful. But mortgage rates remain elevated above 6%, freezing activity in the housing market that enjoyed a tremendous boom during the pandemic thanks to sub-3% mortgage rates.
The MBS team wrote on Tuesday it “does see a path to a 5% mortgage rate” as long as the Fed pulls off two actions: quantitative easing (QE) in mortgage-backed securities and aggressive yield-curve control to the point that 10-year Treasury yields come down to 3.00%-3.25%. The 10-year is pivotal since it serves as a benchmark for 30-year fixed mortgage rates.
