Aug 7, 2024 - Business
How mortgage rates could fall further
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Even if Treasury yields don't fall further from their current levels, there's still quite a lot of room for mortgage rates to continue to drop.
Why it matters: Mortgage rates are still more than 2.6 percentage points higher than the 10-year Treasury yield. That's way above historic levels.
Follow the money: Throughout the 2010s, 30-year mortgages averaged 1.69 percentage points more than the 10-year bond yield.
- If the mortgage spread tightened back to that level, and Treasury yields stay exactly where they are, then the 30-year mortgage rate would fall from 6.55% to 5.57%.
Between the lines: Banks have largely retreated from the mortgage business, so there's less competition on rates — and that's one reason why the spread is higher now. Still, mortgage spreads are unlikely to stay this high indefinitely.
