Mortgage rates have started to come down — a welcome change for both buyers and sellers. But the big question remains: will this trend continue, and how much lower could rates go?

According to market analysts, there’s still room for mortgage rates to decline over the next year. One of the key indicators to watch is the 10-year Treasury yield, which has historically moved in tandem with long-term mortgage rates.

The Connection Between Mortgage Rates and the 10-Year Treasury Yield

For more than 50 years, the 30-year fixed mortgage rate has closely mirrored the movement of the 10-year Treasury yield, a benchmark used to gauge broader interest rate trends.

  • When the Treasury yield rises, mortgage rates typically follow.

  • When it falls, mortgage rates tend to drop as well.

This relationship has proven remarkably consistent, with a typical gap — known as the spread — averaging around 1.76 percentage points (or 176 basis points) between the two.

The Spread Is Finally Shrinking

In recent years, that spread has been much wider than usual, largely due to economic uncertainty and market volatility. Think of the spread as a “fear gauge” — when investors are uneasy about inflation or economic stability, they demand higher returns, which pushes mortgage rates higher.

The good news? That extra margin of uncertainty is starting to fade. As confidence gradually returns to the market, the spread is narrowing, which is an encouraging sign for anyone hoping to see lower mortgage rates ahead.

The 10-Year Treasury Yield Is Expected To Decline

Beyond the shrinking spread, the 10-year Treasury yield itself is projected to decline in the coming months. When you combine those two factors — a lower yield and a tighter spread — you get a strong setup for mortgage rates to trend downward into next year.

At the time of this writing, the 10-year Treasury yield sits around 4.09%. When you add the historical spread of 1.76%, that suggests mortgage rates could settle near 5.85% — a noticeable improvement from the higher levels seen in recent years.

While short-term fluctuations are inevitable, the broader 2026 outlook points to a gradual easing of rates as inflation continues to cool and the economy stabilizes.

What This Means for Buyers and Sellers

For buyers, easing rates could improve affordability and open up more purchasing power.
For sellers, lower rates may encourage more buyers to re-enter the market — helping drive stronger demand and more competitive offers.

However, because rate changes can shift quickly with economic data, it’s essential to stay informed and plan strategically.

Bottom Line

Tracking mortgage rate trends and economic forecasts can be complex — but you don’t have to navigate it alone.

Scott and the Smolen Team has the local experience and market insight to help you make confident decisions, whether you’re buying, selling, or simply planning your next move.