Is a 1% Mortgage Rate Possible?

[Jorge Vazquez]

Is a 1% Mortgage Rate Possible? Can Trump push things into negative territory? Will be amazing for BRRR! People keep asking if mortgage rates could ever drop to something wild like 1% to 2%. Sounds crazy, right? But let's talk it out. What do you think?

[Doug Smith]

I don't think that would be possible or good for the real estate market. First, the "risk free rate of return" is basically what the Treasury is doing. As of this morning (9/19/25), the 10-Year Treasury is right around 4.1% give or take. Long-term mortgages are funded by mortgage-backed securities and, to attract investors, they would have to provide a return that is North of what they could get "risk-free", meaning the Treasury. Why would an investor put money into an instrument with some degree of risk that yields lower than what they could get "risk-free" (risk-free in theory anyway)? The Treasury would have to basically go to zero and that would be apocalyptic for the economy. The only way to achieve a rate that low would be to stack so many points on the deal as to provide a yield high-enough to offset that for an investor. That wouldn't make sense for the borrower. My second point would be what we're seeing now is, in part, a result of those early-2001 crazy low rates. People have such low rates that they aren't "trading up" in favor of staying put. It's partially behind the low inventory and low sales volume. Many people can't justify the cost bump in rates and taxes if they traded up, so they are staying put. That's a great question. We'll have to find time to grab coffee soon since we're both in Tampa.