Why Experts Say Mortgage Rates Should Ease Over the Next Year
If you’ve been watching mortgage rates closely, you’ve likely seen some movement downward. That’s no accident. Experts increasingly agree that we are entering a phase where rates will soften further over the next year.
The reasons are grounded in financial fundamentals, and the implications are meaningful for homebuyers in Colorado. In this article, we’ll break down the mechanics behind rate trends, explain what’s driving optimism, and explore what it means for affordability, timing, and strategy in our local real estate market.
The Connection Between Mortgage Rates and Treasury Yields
The 30-year fixed mortgage rate doesn’t float in a vacuum. For over half a century, it has moved in concert with the 10-year U.S. Treasury yield. When the yield goes up, mortgage rates tend to rise. When it falls, mortgage rates generally ease.
What’s happening today is that the spread between mortgage rates and Treasury yields—the cushion lenders build in to account for risk—is shrinking. When uncertainty in the economy is high, that spread grows. As clarity returns, the spread compresses, which helps bring mortgage rates down.
At present, both the 10-year yield is forecast to decline slightly, and the spread is narrowing. That combination creates a strong case for more rate relief in the year ahead.
Why the Spread Is a Signal
Think of the spread as a market temperature gauge. A wider spread signals caution, higher perceived risk, or uncertainty. A narrower spread suggests increased confidence.
In recent years, mortgage rates have appeared higher than what the Treasury yields alone would suggest—because the spread was unusually wide. But as economic conditions stabilize, that extra cushion is being pared back.
When the spread approaches its historical average, mortgage rates tend to align more closely with the underlying treasury movement. That’s part of why more experts expect sustained downward pressure on borrowing costs.
What Experts Expect Next
Many forecasts point to gradual movement toward mid-to-upper 5 percent rates by next year, assuming no major economic shocks. In some scenarios, mortgage rates could dip even lower if inflation comes into better control and investor confidence strengthens.
The path won’t be linear. There will still be fluctuations tied to jobs data, inflation reports, and global events. But the trend line currently favors easing rather than further hikes.
What This Means for Buyers
A declining rate environment can shift the balance of opportunity:
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Greater buying power. Even a half-point drop in rates lowers monthly payments significantly. This can open up access to better homes or neighborhoods.
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More confidence to act. Buyers hesitant with higher rates may reenter the market if they expect more favorable terms ahead.
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Strategic timing. A rate drop might influence whether you lock now or wait. Your agent and lender should guide you based on local forecasts.
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Negotiation flexibility. With mortgage stress easing, buyers have more leverage to request upgrades, negotiate terms, or explore price boundaries.
If you’re considering a move in the next 12 to 18 months, this evolving rate trend is a major factor to monitor.
What It Means for Sellers
For sellers, these rate trends have implications too:
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More buyer activity. As rates ease, buyer affordability improves, expanding the pool of qualified buyers.
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Faster closing windows. Lower rates can remove financing barriers that sometimes slow down transactions.
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Stronger positioning. Homes priced attractively will feel more compelling as more buyers enter the market with favorable terms.
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Less discounting needed. In some areas, sellers may feel less pressure to reduce price or make aggressive concessions as buyer competition returns.
Timing your sale to coincide with buyer demand upticks could amplify your results.
How This Unfolds in Colorado
Colorado’s market is particularly sensitive to rate shifts. With already constrained inventory in many desirable areas, even modest improvements in affordability can re-ignite buyer activity.
Communities like Castle Pines, Lone Tree, and Greenwood Village may see increased demand for high quality homes as buyers gain more borrowing power. In more established neighborhoods with tighter resale inventory, rate improvements can help bridge affordability gaps.
Builders offering incentives or rate buy-downs will likely benefit even more in this climate, as buyers compare new construction and resale options.
What Buyers Should Do Now
To take advantage of this potential easing, consider these steps:
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Monitor rate forecasts and lock windows with your lender
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Prioritize neighborhoods with rising demand and limited supply
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Structure your offer to include seller contributions or rate buydown options
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Be ready to act quickly when pricing aligns with rate improvements
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Work with agents who have close insight into local lender behavior and rate trends
Moving proactively can capture value while conditions are turning in your favor.
What Sellers Should Do Now
As a seller, timing and positioning matter more than ever:
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List when buyer affordability is trending up
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Highlight features that help prospective buyers (like newer systems, energy efficiency, low maintenance)
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Be ready for increased competition and adjust strategy by market segment
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Maintain flexible terms and show readiness to negotiate
In a market where rate movement makes a difference, perception and presentation will amplify results.
Watch These Key Indicators
To stay ahead, keep an eye on:
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The 10-year treasury yield trajectory
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Spread between mortgage rates and treasury yields
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Inflation reports, jobs data, and Fed commentary
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Local buyer activity, especially in price bands near your interest
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New construction incentives and rate buy-down offerings
These signals often precede major shifts in affordability and buyer momentum.
A Thought on Timing
Even with optimistic rate projections, market timing remains a balance between patience and action. Waiting indefinitely for perfect rates can backfire if inventory tightens or competition increases. Acting too early could lock in less favorable terms.
The sweet spot is where preparedness meets opportunity. If you’re ready to make a move, doing so when rates are easing—but before the rush—might be ideal.
If you want an up-to-date analysis of how rate trends are affecting your neighborhood or your deal, reach out to Corken + Company now. Visit www.corken.co or call 303-858-8003 to discuss your goals, timing, and strategy.
Corken + Company Real Estate Group
Real Estate Solutions Without Limits.
