BiggerPockets Daily Why a Shrinking Mortgage Spread is Wonderful News For Investors
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Aug 26, 2025 Mortgage spreads are at a three-year low, leading to falling mortgage rates and exciting opportunities for buyers. The shrinking gap between these rates and Treasury yields means homeowners can lock in lower payments. This shift enhances purchasing power, impacting investor decisions on acquisitions and refinancing. The podcast explores how these trends are reshaping the real estate market, providing valuable insights into negotiation strategies in today's housing landscape.
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What The Mortgage Spread Actually Is
- The mortgage spread is the gap between 30-year mortgage rates and the 10-year Treasury yield.
- That spread determines how mortgage rates move relative to Treasury yields and overall economic forces.
Why Lenders Require A Spread
- Lenders need a positive spread to prefer mortgages over risk-free Treasuries.
- If mortgage and Treasury yields matched, lenders would choose Treasuries for safety.
Spreads Have Fallen Toward Historical Levels
- The mortgage spread has narrowed to about 2.26% from higher levels earlier this year and last year.
- Historically spreads sit around 1.5–2%, so the current trend toward lower spreads can push mortgage rates down faster than Treasuries.