Explaining Today’s Mortgage Rates

 

If you’re following mortgage rates because you know they impact your borrowing costs, you may be wondering what the future holds for them. Unfortunately, there’s no easy way to answer that question because mortgage rates are notoriously hard to forecast.   

But, there’s one thing that’s historically a good indicator of what’ll happen with rates, and that’s the relationship between the 30-Year Mortgage Rate and the 10-Year Treasury Yield.

Historically, the average spread between the two over the last 50 years was 1.72 percentage points (also commonly referred to as 172 basis points).

Factors such as inflation, other economic drivers, and the policy and decisions from the Federal Reserve (The Fed) are all influencing mortgage rates and a widening spread.  

Why Does This Matter for You?

This may feel overly technical and granular, but here’s why homebuyers like you should understand the spread. It means, based on the normal historical gap between the two, there’s room for mortgage rates to improve today.

And, experts think that’s what lies ahead as long as inflation continues to cool. As Odeta Kushi, Deputy Chief Economist at First American, explains: “It’s reasonable to assume that the spread and, therefore, mortgage rates will retreat in the second half of the year if the Fed takes its foot off the monetary tightening pedal . . .”

If you’re either a first-time home buyer or a current homeowner thinking of moving into a home that better fits your current needs, keep on top of what’s happening with mortgage rates and what experts think will happen in the coming months.  

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