You want mortgage rates to fall – and they’ve started to. But is it going to last? And how low will they go?
Experts say there’s room for rates to come down even more over the next year. One of the leading indicators to watch is the 10-year Treasury yield. Here’s why that matters.
The Link Between Mortgage Rates and the 10-Year Treasury Yield
For over 50 years, the 30-year fixed mortgage rate has closely followed the movement of the 10-year Treasury yield — a widely watched benchmark for long-term interest rates.
When the Treasury yield climbs, mortgage rates tend to rise. When the yield falls, mortgage rates typically come down.
That relationship has been consistent for decades. Experts generally expect a “spread” (or gap) of about 1.76 percentage points between the two rates — a key indicator of market stability.
The Spread Is Shrinking
In recent years, that spread has been wider than normal. Why? Because uncertainty in the economy widens the gap.
When there’s fear or volatility, lenders price in extra risk, resulting in higher mortgage rates.
The good news? The spread is now shrinking, signaling improving confidence in the market and paving the way for mortgage rates to decline even further.
As Redfin notes:
“A lower mortgage spread equals lower mortgage rates. If the spread continues to decline, mortgage rates could fall more than they already have.”
The 10-Year Treasury Yield Is Expected To Decline
It’s not just the spread — the 10-year Treasury yield itself is projected to come down in the months ahead.
When both the yield and the spread decrease, mortgage rates tend to follow suit.
Currently, with the 10-year Treasury yield around 4.09%, adding the average spread of 1.76% would imply mortgage rates near 5.85% — potentially within reach toward the end of next year.
What To Expect Moving Into 2026
While economic factors such as inflation, job growth, and Federal Reserve policy will continue to influence rates, the overall outlook suggests a gradual easing of mortgage rates into 2026.
Fluctuations are expected along the way, but the trend appears positive for buyers and sellers planning their next move.
Bottom Line
Understanding how mortgage rates move — and what drives them — can help you make smarter real estate decisions.
If you’re planning to buy, sell, or refinance, having an experienced professional on your side makes all the difference.
📞 Reach out to Michael Olubajo, Associate Broker, for expert insight and real-time updates on mortgage rates and local market trends.
