Mortgage Rates Forecast to Ease to 5.9% by 2031, but Demand Crashes as Rates Spike Above 7%

Key points

• The 30-year fixed mortgage rate reached 7.22% in early September 2026, its highest level in nearly two years.
• Mortgage application volume fell 4.1% week-over-week, with purchase applications down 19% year-over-year and refinance applications down 65%.
• A five-year forecast projects the 30-year fixed rate to fall from 6.20% in 2027 to 5.90% by 2031.
• The forecast relies on the 10-year Treasury yield easing to 4.0% and the spread between Treasuries and mortgages narrowing to 1.90 percentage points.
• Local experts in North Texas note that while higher rates reduce competition, rising property taxes and insurance costs are major affordability hurdles.

Background

In early September 2026, mortgage rates were hovering near 7.02%, with 15-year fixed rates at 6.32%. Previous forecasts from August 2026 suggested rates would ease slowly but remain high, with base-case projections showing rates around 5.70% by 2030. The current spike represents a significant deviation from those earlier expectations, driven by recent economic data and oil price implications.

How outlets are covering it

CNBC highlights the immediate negative impact on demand, noting that refinance applications are 65% lower than a year ago due to rates being nearly a full percentage point higher. NBC DFW offers a more nuanced local view, with real estate experts suggesting that higher rates may reduce competition for buyers, though they emphasize that property taxes and insurance are now bigger affordability concerns than interest rates. Yahoo Finance provides the long-term structural outlook, using AI-assisted models to project a gradual decline in rates, contrasting with the short-term volatility seen in current market data.

Why it matters

The divergence between short-term rate spikes and long-term forecasts creates uncertainty for homebuyers and refinancers. While current rates are suppressing demand, the projected decline to the high-5% range by 2031 suggests that waiting may be beneficial for those not in urgent need of a home. However, the risk of a bear case, where rates breach 7% in 2027-2028 due to persistent inflation, remains a significant factor in financial planning.

What to watch

The Federal Reserve is scheduled to meet in September 2026, with expectations of a rate cut before the end of 2027. Market participants will watch closely for changes in the 10-year Treasury yield and the spread between Treasuries and mortgage rates, which will determine if the base-case forecast of 5.90% by 2031 materializes or if a bear case scenario pushes rates higher.