Fed Cuts: Why Mortgage Rates May Not Budge
Update: 2025-12-28
Description
Bond markets face a conundrum in 2026, with long-term interest rates potentially remaining high despite Fed rate cuts. This could hinder homebuyers and businesses, as the ten-year Treasury yield, which influences mortgage rates, may not decrease significantly. Economists at ING predict three scenarios: a moderate increase to 4.5% due to inflation, a drop to 4.25% as housing cools, or a recession-driven decrease to 3%. The base case suggests borrowing costs will remain elevated, challenging the Feds ability to control rates throughout the year.
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