Gap between mortgage rates, 10-year treasury yield hits lowest level in over three years

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The difference between mortgage rates and 10-year treasury yield (US10Y [https://seekingalpha.com/symbol/US10Y]) has dropped to its lowest level in more than three years, according to [https://seekingalpha.com/pr/20211303-redfin-reports-the-mortgage-spread-has-dropped-to-a-3-year-low-that-s-good-news-for] the Rocket Companies (NYSE:RKT [https://seekingalpha.com/symbol/RKT]) unit Redfin (RDFN).

The dip in "mortgage spread" can lead to mortgage rates to fall, even without the Federal Reserve cutting interest rates, said the August 26 report.

The spread was 2.26 percentage points as of August 22, down from about 2.5 at the start of summer and 2.68 a year earlier.

The report noted that the spread is falling, but has room to decrease further to more typical levels of about 1.5-2 percentage points.

"It's important to note that if the Fed cuts interest rates as expected in September—or more than expected—mortgage rates may fall more than anticipated because the spread is also falling," said Chen Zhao, Redfin's head of economics research.

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