HousingWire
Mortgage spreads are near a normal range of 1.6% to 1.8%
By Logan Mohtashami
After a weekend of crazy headlines and a stock sell-off on Monday morning, bond yields are close to hitting 4% again, but mortgage rates are back under 6% once again, which is the multiyear low in recent history.
The biggest reason rates are under 6% isn’t just that the 2025 labor market produced the lowest job-growth year in the 21st century outside of recession. It’s because mortgage spreads are close to normal again.
Mortgage News Daily just quoted a national average of 5.99%. With many rate cuts in the system and two more likely to happen in 2026, it’s not shocking that mortgage rates are here, even with the recent inflation print remaining above the Federal Reserve’s target. Always remember the rule: it’s really labor over inflation. And with headlines that AI will displace a lot of work, money has gone to the bond market, sending rates lower today.
Mortgage spreads serve as the hero
In 2024, when the 10-year yield fell to 3.62%, mortgage rates never fell below 6% because mortgage spreads remained elevated.
This year, however, mortgage spreads are close to their normal range of 1.6% to 1.8%, which is a big reason the 10-year yield can still be above 4%. Mortgage spreads, according to our previous HousingWire tracker report, were at 1.94% this week. Back in 2023, the figure got as high as 3.11%, which means mortgage rates would still be above 7% today if we were dealing with the worst levels of mortgage spreads.
Currently, with today’s stock sell-off, the 10-year yield is at 4.03%. As you can see in the chart below, that figure was lower in 2024. But mortgage spreads were higher then, hence why we didn’t have rates below 6% then. If the 10-year yield fell toward 3.62% today, mortgage rates would easily drop below 5.75% this year.
Conclusion
For my 2026 forecast, the lowest mortgage rate I had was 5.75%, along with a 10-year yield of 3.80%. Of course, if the labor market breaks, the Fed sounds dovish — or we get a very low level of normal spreads at 1.6% — we would be below 5.75% today.
All in all, it’s much better that mortgage rates are below 6% heading into spring than above 7%. With higher inventory, cooling price growth, and the addition of lower rates with less volatility, it’s a much healthier housing market than the past few years.
Logan Mohtashami is a renowned expert in the mortgage and housing ecosystem, recognized for his insightful analysis and commentary on the U.S. economy and real estate market. Mohtashami is a lead analyst for HousingWire and is a regular contributor on the HousingWire Daily podcast. With a background spanning over two decades in the mortgage industry, Mohtashami — nicknamed “Chart Daddy” — has the remarkable ability to decipher complex economic data and translate it into understandable, actionable insights. This knowledge has made Mohtashami a sought-after commentator and his expertise has been featured extensively in news outlets, including CNBC, where he is a frequent guest.