This article originally appeared in the October 2026 edition of the Charlotte Business Journal. You can read the story online at the Charlotte Business Journal (subscription not required) or continue below.
People routinely ask me when mortgage rates are going to get back to their pre-2022 levels. Those were halcyon days when 30-year fixed-rate mortgages often ranged between 2% and 4%. [1]
Shucks, some lucky folks with excellent credit and a healthy paycheck might have been able to do even better than that on occasion.
Unfortunately, absent a significant change in economic or financial conditions, we should probably forget about what mortgage rates used to be five to 10 years ago. The reason for this is basic economics.
You see, interest rates are essentially the price of money. As you know, the law of supply and demand applies to money just as it does to almost everything else. What you might not know is the U.S. Treasury market plays a major role in influencing borrowing costs in the U.S. economy.
For instance, if Washington can borrow money for five years at, say, 4%, what is the likelihood that a lender is going to extend credit to you for less than that? Some people might be able to do so, but the average Joe probably shouldn’t hold his breath.
The problem is the U.S. Treasury has now run up a tab in excess of $40 trillion in total federal debt. That is a lot of money our government has to finance in some form or fashion. In essence, it is a huge amount of supply. And what happens to the price of just about anything when supply increases faster than the demand? It goes down. [2]
Now, since prices and interest rates move in opposite directions, increased supply can put pressure on the price of U.S. Treasury debt. When Treasury prices go down, interest rates go up.
Now, the knee-jerk reaction might be something along the lines of: “The Treasury has been running deficits for years. How were interest rates so low for so long even as we amassed so much debt?”
That is a great question. The answer is pretty simple. The powers that be increased the demand for government debt. Basically, the Federal Reserve backstopped the bond market.
At the end of 2007, right before the financial crisis, the total assets on the Federal Reserve’s (Fed) balance sheet were just under $900 billion. In order to provide liquidity and keep interest rates from soaring during that difficult period, the Fed started buying up all sorts of government debt. [3]
By the end of 2019, long past the worst of the crisis, the Fed had grown its balance sheet to over $4 trillion. Obviously, it had soaked up a lot of Washington’s debt in the process.
Then, COVID happened, and the federal government started throwing money around like it had it. Perhaps not surprisingly, the Fed stepped in yet again to absorb much of this issuance to keep interest rates somewhat in check. So much so that by the end of the first quarter of 2022, the Fed’s balance sheet had grown to, get this, nearly $9 trillion. [3]
On that same day, March 31, 2022, the closing yield to maturity on the 10-year U.S. Treasury note was 2.32%. Then, the Fed, apparently feeling the crises were largely over, started reducing the size of its balance sheet. Put another way, it started allowing securities to roll off its balance sheet as they matured. [4]
So much so that by the end of 2024, its balance sheet had fallen to around $6.8 trillion. Obviously, that is about $2 trillion less than its 2022 peak, even as the Treasury continued to tack on the debt. Care to take a guess what the yield to maturity on the 10-year Treasury was at the end of December of that year? [3]
Let’s try 4.58%, not quite double where it had been at the start of 2022. That is a significant move in a relatively short period of time. One which had severe negative ramifications for many first-time homebuyers and real estate professionals across the country. [4]
Now, since that time, the Fed has basically kept the size of its balance sheet roughly the same. It tried to shrink it some more but basically gave that up at the end of last year. As you know, Washington has kept on increasing the debt supply, so where do you think the 10-year ended this past August? [5]
According to Federal Reserve Bank of St. Louis (FRED) data, the 10-year Treasury yield ended August 2026 at approximately 4.75%. [4]
With this little history lesson out of the way, there is little reason to think U.S. Treasury rates are going to meaningfully come down based on supply dynamics alone. A sustained decline would require stronger demand or Washington borrowing a lot less money. Now, arguably, one of the only institutions in the world that can supply the necessary level of demand is the Fed, since it can effectively create the potential for money out of thin air.
So, taking it full circle, when will mortgage rates get back to the levels the markets enjoyed prior to 2022? It would seem it could take another crisis of some kind before the Fed could rationalize adding trillions of dollars of debt securities to its balance sheet again.
That is something I would prefer not to happen.
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SOURCES:
[1] Freddie Mac, Primary Mortgage Market Survey (PMMS), historical 30-year fixed-rate mortgage averages, 2021 archive.
[2] U.S. Department of the Treasury, Debt to the Penny. Fiscal Data.
[3] Federal Reserve Bank of St. Louis (FRED), Total Assets: Total Assets Less Eliminations from Consolidation (WALCL).
[4] Federal Reserve Bank of St. Louis (FRED), Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis (DGS10).
[5] Federal Reserve Board, Federal Reserve Balance Sheet Developments, November 2025.