The gap, or spread, between the 10-year Treasury yield and the average rate on a 30-year mortgage widened this year as inflation hit the highest level in decades and the Fed began raising interest rates and taking other steps aimed at taming surging prices.
Mike Fratantoni, chief economist at the Mortgage Bankers Association, agreed: “One of the more puzzling aspects of the current environment has been the extremely wide spread of mortgage rates relative to Treasury rates." In the months that followed, as bond yields shot upward and mortgage rates doubled from 2021 levels, that spread increased. Last week, it was 252 basis-points wide as the 10-year Treasury yield averaged 3.75%, while the 30-year home loan rate averaged 6.27%.
Several factors are driving the wider-than-normal spread. Inflation and the Fed's wave of rate hikes has pushed up costs for banks, which are then passed along to borrowers with higher rates.
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