Key facts
- Mortgage spreads have kept mortgage rates below 7% in 2026.
- Housing demand remains stable in 2026.
- Higher yields on the 10-year Treasury are present in 2026.
- Sales show slight year-over-year gains.
- Previous years saw rates exceed 7% with similar 10-year Treasury yields.
In 2026, housing demand is showing resilience, primarily supported by mortgage spreads that have successfully kept interest rates below the 7% threshold. This market dynamic is occurring even as yields on longer-term debt instruments, such as the 10-year Treasury, have risen. The stability in mortgage rates, a direct consequence of these spreads, has prevented the kind of sharp decline in housing sales that might be expected under different circumstances.
Historically, a scenario with comparable 10-year Treasury yields would have likely resulted in mortgage rates exceeding 7%, a level historically associated with a significant dampening of housing market activity. However, the current market is demonstrating a different pattern. Although overall sales figures indicate a slowdown compared to peak periods, they are still registering slight year-over-year gains. This suggests that the market is absorbing higher rates more effectively than in the past, with the 7% mark acting as a critical psychological and practical barrier.
The underlying mechanism is the mortgage spread, which refers to the difference between the yield on a mortgage-backed security and a benchmark Treasury yield. When this spread is narrow, it means lenders are not charging a significantly higher premium for originating mortgages, even if broader market yields are elevated. This has been a key factor in maintaining affordability for potential homebuyers and sustaining demand.