If you’ve been hoping for lower mortgage rates, you’ve finally gotten some good news — rates have started to fall. But the big question is: will it last? And just how low can they go?
Experts say there’s still room for mortgage rates to drop over the next year. One of the key indicators to watch is the 10-year Treasury yield — and here’s why it matters.
The Connection Between Mortgage Rates and the 10-Year Treasury Yield
For more than 50 years, 30-year fixed mortgage rates have closely tracked the 10-year Treasury yield — a benchmark for long-term interest rates.
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When the Treasury yield rises, mortgage rates usually rise too.
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When the yield falls, mortgage rates tend to follow.
The difference between the two is known as the spread, which normally averages about 1.76 percentage points (or 176 basis points). This relationship has been reliable for decades.
Why the Spread Is Shrinking — and Why That’s Good News
Recently, the spread has been wider than usual due to economic uncertainty — think of it as a “fear gap.” When markets are unsure about the future, lenders add extra cushion to rates.
But now, that spread is narrowing again, a sign that confidence is returning.
According to Redfin,
“A lower mortgage spread equals lower mortgage rates. If the spread continues to decline, mortgage rates could fall more than they already have.”
What Experts Expect for 2026
It’s not just the spread improving — the 10-year Treasury yield itself is expected to decline over the next several months. Combine both trends, and we may see mortgage rates gradually easing throughout 2025 and into 2026.
Here’s a simple breakdown:
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10-year Treasury yield: around 4.09%
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Average spread: about 1.76%
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Expected mortgage rate: roughly 5.85%
If these patterns hold, rates could dip into the upper 5s by the end of next year — a welcome relief for many homebuyers.
Bottom Line
While economic shifts, inflation, and job market trends will continue to influence rates, the outlook for 2026 looks optimistic — with mortgage rates likely to trend lower over time.
Keeping up with these changes can feel overwhelming, but you don’t have to do it alone.
Stay informed with the latest market trends. Contact us today for expert guidance on buying or selling in this evolving market. To schedule a meeting, email us at [email protected]
For more insights on real estate trends, visit the Keeping Current Matters website (https://www.keepingcurrentmatters.com/blog/)
