US mortgage rates may stay above 7% through 2027 as inflation, government borrowing and AI spending raise costs

US mortgage rates may remain above 7% through 2027. Major housing groups expect mortgage rates to stay high for an extended period, making home loans expensive for Americans who want to buy houses. Fannie Mae forecasts that mortgage rates could average 7.5% in 2027, while the Mortgage Bankers Association expects rates to remain above 7% that year.

US mortgage rates may remain above 7% through 2027 amid inflation and rising borrowing costs. (Pexel/Representative image) (Pexel)The 10-year US Treasury yield plays a major role in mortgage rates. Mortgage rates generally move in line with the yield on 10-year Treasury bonds.

High inflation is one of the main reasons borrowing costs could stay elevated. When inflation remains high, investors usually demand higher returns on long-term bonds, according to CNBC. US inflation has remained above the Federal Reserve's target for years.

However, the index has not recorded inflation below that target since February 2021, according to the Federal Reserve's data. Persistent inflation could make it harder for long-term borrowing costs to fall, cited by CNBC.

Heavy US government borrowing is adding pressure to borrowing costs. The federal government is borrowing large amounts of money. The artificial intelligence boom is increasing demand for money. The rapid growth of AI is leading to huge private investments in data centres, electricity generation and other infrastructure, according to CNBC.

The economy has changed from a period of plentiful capital to one of greater competition for funds. Selma Hepp said the 2010s had more available capital than investment opportunities. Low inflation, abundant savings and relatively weak demand for money helped keep mortgage rates low during that period.

Today, heavy government borrowing and large investments in AI infrastructure are creating greater competition for capital, according to CNBC. The Fed is no longer providing the same level of support to the mortgage market.

The central bank has stepped away from actively buying mortgage-backed securities, removing one source of support that helped keep borrowing costs low during the pandemic. Durva More is a Senior Content Producer at Hindustan Times, where she covers finance, and global news.

She brings experience across digital and television journalism, with a strong focus on breaking news, business reporting, and international affairs. Before joining Hindustan Times, Durva worked as an International News Writer at The Economic Times, covering a diverse range of subjects including global politics, business, sports, entertainment, and major world events.

She also worked as a Business Reporter with NDTV Profit. A postgraduate diploma holder in Journalism from the Asian College of Journalism, Durva is passionate about field reporting and storytelling. She thrives on the adrenaline of chasing stories, speaking with people from different walks of life, and amplifying voices that deserve to be heard.

Her reporting is driven by curiosity, accuracy, and a commitment to making complex subjects accessible to readers. When she is not chasing stories or covering breaking news, Durva enjoys reading books and painting. She loves exploring new ideas, meeting people, and learning about different perspectives.

For her, both journalism and art are ways to understand the world and tell stories that matter.Read More