2 Wall Street Forecasts Disagree on When Rates Fall. What It Means for Homebuyers and Retirees.
Morningstar and Charles Schwab released rate forecasts on the same day and reached opposite conclusions, and which firm is right will determine whether your next mortgage payment goes up or down before 2028.
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Two major investment firms released podcast episodes on October 23, 2026, and they disagree on the question that matters most to anyone buying a home or living off savings. The Investing Insights podcast from Morningstar expects inflation to ease and the Federal Reserve to begin cutting “in the second half of 2027.” The On Investing podcast from Charles Schwab expects the Fed to hold at its October 27–28 meeting and then raise rates again, forecasting “a hike by year end in December and then another one sometime in early 2027.” One forecast has relief arriving by 2028. The other has more hikes coming first. For household budgets, Schwab’s path carries greater planning risk, while Morningstar’s would offer upside.
Where Rates Stand Right Now
On September 17, 2026, the Fed raised the upper bound of its target range to 4.00% from 3.75%, a move Schwab expects the Fed to repeat. The 10-year Treasury yield closed at 5.13% on October 21, below its one-year closing high of 5.31% on October 5. After a hot Consumer Price Index report, Morningstar noted that the 10-year briefly “got as high as 5.32%” intraday.
The average 30-year fixed mortgage rate was 7.32% for the week of October 22, down from the one-year high of 7.40% the week before. Prediction-market traders put the probability of a hold at the October meeting, Schwab’s base case, at 93.5%.
Why Housing Has Not Hit Bottom
According to Morningstar, the median U.S. existing home price has risen more than 50% since 2020. Owners holding cheap mortgages have little reason to sell, and Morningstar’s podcast warns that because of this lock-in effect, existing-home transactions “will probably remain quite low.” In September, existing-home sales ran at an annualized 3.99 million, a pace typical of a soft market. Morningstar adds that if rates stay where they are, “I don’t think we’ve seen the bottom of the housing market in this cycle yet.”
For buyers, the advantage is in new construction. Builders subsidize rate buydowns, which Morningstar describes as “trading volume at the expense of margins.”
Lennar Shows What a Buydown Costs
Lennar (NYSE:LEN | LEN Price Prediction) is putting numbers on that tradeoff. In its fiscal third quarter, gross margin on home sales fell to 15.8% from 17.5% a year earlier, and incentives ran near 12.0%. Lennar also lowered its full-year delivery guidance to 80,000 to 81,000 homes. Rate cuts, CEO Stuart Miller said, would help, “but we are not holding our breath.”
Morningstar says Lennar’s stock price implies “their depressed margins will never recover, which we think is just too pessimistic.” Shares rose 8.7% on October 22 to $84.45 but remain down 34.4% over the past year. If Schwab is right, the risk grows: a Lennar executive said higher rates would raise “the cost of our rate buydown.”
Retirees Can Lock In Income Today
For savers, Schwab’s forecast is mostly good news. Schwab calls current yields “very attractive” and says that a strategy paying 5% earns its keep through income even if prices go nowhere. Price declines are temporary, Schwab notes, because on a bond “held to maturity, you do get the principal back.”
Higher yields also bring more risk. In an earlier episode, Schwab said junk-rated issuers “tend to be most at risk when rates rise.” Schwab also called neocloud AI companies the riskiest corner of AI, since they fund long-duration growth with short-fuse debt.
Signals to Watch After October 28
Look past the decision at the October 27–28 meeting, which is almost certain to be a hold, and focus on the inflation data. Schwab says a core Personal Consumption Expenditures reading of 0.3% for the month would be too hot and would keep a December hike in play. If Schwab is right, the first signs will be a Fed hike in December and the 10-year yield climbing back toward 5.31%. If Morningstar is right, weekly mortgage rates will start drifting down from 7.32% before the Fed changes anything. In Lennar’s next earnings report, compare gross margin with its 15.5% to 16.0% guidance to see whether housing backs Schwab or Morningstar.
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Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.
Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community.
Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.
Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, moderating workshop sessions at regional conventions.
