Mortgage interest rates surged in the post-pandemic era, but borrowers saw some relief recently when rates plunged to a two-year low. However, that relief was fleeting, as a rate increase occurred in October after the September decline. 

That said, rates are still projected to fall throughout 2024 — due, in large part, to expectations that the Federal Reserve will lower interest rates again. Still, many would-be homebuyers are uncertain about whether to come off the sidelines and buy or wait to see if mortgage loans continue to become cheaper over time.

To make this choice, it’s helpful to understand how mortgage rates are determined. Since the 10-year Treasury yield plays a role, let’s take a look at how it could affect your borrowing costs. 

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What is the 10-year Treasury yield?

To understand how the 10-year treasury yield affects mortgage rates, it’s first important to understand what it is. 

The U.S. Treasury Department issues treasury notes, or debt obligations with a maturity date of two, three, five, seven or 10 years. The rates for these treasury notes are fixed at auction and investors receive interest over time. The 10-year treasury yield is the rate 10-year notes offer. 

The 10-year treasury yield matters to would-be homebuyers because it has a strong relationship with mortgage rates. 

“Typically, when we see the 10-year yield rise, we’d expect mortgage rates to increase,” says Emily Overton, capital markets analyst at Veterans United Home Loans.  

This relationship exists because 10-year treasury notes and mortgage-backed securities typically compete for the same investors. 

“Investors in the capital markets who buy mortgages need to be incented to purchase these assets,” says Jess Schulman, president of Bluebird Lending. “If the 10-year treasury rate goes up, mortgage rates go up as well, so the investment in mortgages is still an attractive option compared to investing in treasuries. Conversely, if treasury rates go down, mortgage rates will decrease.” 

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How does the 10-year Treasury yield affect mortgage rates?

While there’s a strong relationship between the 10-year treasury yield and mortgage rates, that doesn’t mean the two are the same, or even that one directly determines the other. 

“The 10-year treasury yield is often viewed as the main benchmark for the direction mortgage rates are headed, but it’s a common misconception that it directly impacts mortgage rates,” says Patricia Maguire-Feltch, managing director of consumer origination sales at Chase Home Lending. 

Maguire-Feltch explained there are multiple factors at play in setting home loan rates besides just how treasury yields are trending. 

“Mortgage rates are primarily determined by investor demand for mortgage bonds, which are influenced by the market’s expectations for where inflation, economic conditions and interest rate decisions by the Fed are headed,” says Maguire-Feltch.

Maguire-Feltch says mortgage rates and 10-year treasury yields are often conflated because they move in tandem since the same indicators impact demand for both mortgage bonds and treasury notes. Still, while rates on both investments move together, there’s an important difference between them. 

“We often see them follow similar patterns,” says Cody Horvat, a licensed real estate broker at Compass explained of treasury bonds and mortgage rates. However, he explained that “mortgage rates are usually a bit higher, due to their increased risk.” 

How much higher? 

“Over the past five years, the average difference between the 10-year Treasury rate and mortgage rates has been roughly 2.25%,” says Maguire-Feltch. 

What will happen to mortgage rates in the final months of the year?

The good news is that trends in 10-year treasury yields and other economic indicators both suggest would-be home-buyers are likely to enjoy relatively favorable borrowing conditions through the final months of 2024 — at least compared to recent years.

“Right now, we’re seeing the 10-year treasury yield bump up from its low point this past September, and mortgage rates are following a similar pattern,” Horvat says. “However, rates are still much lower than we’ve seen them the past two years, so buyers that have been waiting on the sidelines for rates to come down are entering the market at an increased pace.”

There’s also some bad news, though. Rates may not fall much further. 

“Barring any unexpected cracks in the employment situation, mortgage rates may hang near their current range through the remainder of the year,” Overton says.  

And she isn’t alone in this view. 

In fact, Horvat says that while he believes the Fed will continue cuts into 2024, “we probably won’t see any massive block-buster cuts anytime soon, but more slow, steady, and measured reductions as we round out the year,” and Maguire-Feltch says that “given the economy is in a better place than it was earlier this year, we might not see as many cuts to rates and mortgage prices as initially thought. If we see any additional cuts, they are likely to be slow and gradual.”

Overton says that employment numbers are strong enough that there’s some room for the situation to worsen before current rate forecasts would adjust. 

“This is important for mortgage rates as we’d need to see higher expectations from the markets for additional cuts for mortgage rates to see more improvement,” she says. 

The bottom line

If you’re waiting for a rate drop, you may not be excited at these predictions that rates won’t fall much further for a while. Still, there could be an upside to steady rates, as Horvat warns a big decline could “lead to a hotter than usual housing market after the holiday season wraps up and we enter the new year,” since borrowers who’ve been sitting on the sideline are likely to “flood the market,” and drive up prices. 

“Depending on how far rates drop over the coming months, we could see pandemic levels of competition in the housing market as buyers waive inspections and contingencies to get a leg up on other homebuyers,” Horvat says.

If you can afford to buy a home at today’s rates, it may be worth jumping in before this occurs, as refinancing later if rates drop further is a possibility but you can’t get back today’s prices after a cost surge in the housing market. 

If you’re a man in the Philadelphia area who’s inclined to vote for Vice President Kamala Harris but still not entirely sold on the idea, her team hopes you’ll listen to Duke, a Southwest Philadelphia resident and star of “She Can Do It,” a 30-second ad that begins airing on broadcast and cable television stations in the Philadelphia area on Thursday.

Sitting on a stoop, Duke tells someone off camera, “When I look at Kamala, I look at my aunt. I mean, we’ve got this Black lady, strong, who stands on business, who means what she says, is relatable. I see the empathy, that’s just, like, in their heart, the nature of a female.”

As footage of Harris flashes on screen, he adds: “She shows a lot of empathy when she speaks. Her actions — Kamala’s strong, she’s powerful. She stern, she means everything that she says. This November, I’m standing with Kamala.”

The ad is set to air during local broadcasts of Philadelphia 76ers NBA basketball games, and during local cable ad breaks during TNT coverage of NBA games and its popular “Inside the NBA” pregame show, as well as on networks popular with Black viewers, including BET, OWN, and VH1. The ad is part of an ongoing $370 million national ad campaign that stretches from Labor Day to Election Day.

The message is clearly tailored to reach Black men in Pennsylvania — and any other man who may be wary of supporting a woman as the next president. (The Harris campaign officially calls them “persuadable voters.”) The spot comes as Harris trails former President Donald Trump among men by double digits in some recent polls and amid signs he’s chipping away at traditionally strong support for the Democratic Party among Black voters. Failure to sustain high levels of minority voter support in Pennsylvania could cost Harris the state if she can’t make up those losses with other groups.

But in a nod to the realities of modern media consumption and political advertising, the ad first surfaced on streaming media. During the Fox telecast of the Philadelphia Eagles – New York Giants NFL game last Sunday, certain viewers streaming the game on Hulu spotted the message — an example of how digital video advertising can be targeted, in this case to male viewers watching the game in the Philadelphia area. That’s how a traveling CBS News correspondent first spotted the ad — watching the game on the Hulu app Sunday afternoon while riding a train into Philadelphia.

Ed O’Keefe

Ed O’Keefe is CBS News senior White House and political correspondent. He previously worked for The Washington Post covering presidential campaigns, Congress and federal agencies. His primary focus is on President Biden, Vice President Harris and political issues across the country.