Amidst fluctuating job headlines and economic concerns, mortgage rates have remained stable, thanks to improving mortgage spreads in 2024 and 2025. The article emphasizes the need for real estate professionals to understand mortgage spreads, defined as the gap between the 10-year yield and 30-year mortgage rate. After the banking crisis in 2023, spreads widened significantly, contributing to higher mortgage rates. Current improvements in spreads limit rate increases, potentially stabilizing the housing market and facilitating sales if we return to typical spread levels.
When mortgage spreads widen, the gap between the 10-year yield and the 30-year mortgage rate increases, resulting in higher-than-normal mortgage rates.
In 2023, spreads reached as high as 3.10%. We likely would not have seen mortgage rates at 8% that year if the spreads hadn't worsened after the banking crisis.
With regular mortgage spreads, mortgage rates would currently be 0.68% to 0.78% lower. If we return to typical spreads, many housing issues could be resolved.
This year, mortgage spreads are getting better, meaning that the damage from higher bond yields is getting limited compared to the market of 2023.
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