Mortgage spreads
In 2025, my prediction for mortgage spreads was an improvement of 0.27%-0.41%, with an average of 2.54%. As volatility decreases and the Federal Reserve continues its rate-cut cycle, similar to 2024, we should see improvements in spreads. Last week, with mortgage spreads at 2.15%, we saw a 0.39% improvement, nearing the peak of my forecast. If further improvement occurs, then my 2025 forecast may have been too conservative.
Mortgage rates in 2025 would not have hit a yearly low without improved mortgage spreads. The 10-year yield has not reached the lows of the previous year at 3.62% intraday, so spreads have played a significant role in 2025.
If spreads were as high as they were at the peak of 2023, mortgage rates would currently be 0.95% higher. Conversely, returning to normal spreads could lower mortgage rates by 0.55% to 0.35% from current levels. The best levels of normal spreads could mean mortgage rates at 5.83% to 6.03% today.
10-year yield and mortgage rates
My 2025 forecast included the following ranges:
- Mortgage rates between 5.75% and 7.25%
- The 10-year yield fluctuating between 3.80% and 4.70%
Last week, positive economic data pushed the 10-year yield back to a key retracement level after reaching 4%. Better economic data can lead to higher bond yields, although the volatility has not been as dramatic as the previous year. Mortgage rates remained relatively stable, starting at 6.35% and ending the week at 6.375%.
Purchase application data
Despite rising rates, there was positive growth in purchase application data last week, with week-to-week growth of 0.3% and year-over-year growth of 18%. The weekly data for 2025 so far includes 19 positive readings, 12 negative readings, and 6 flat prints.
Since mortgage rates have decreased, the weekly data has shown positive trends, with 7 positive weeks and 8 straight weeks of double-digit growth year over year.
Weekly pending sales
Weekly pending home sales provide insight into data trends, with slight year-over-year growth observed. Last week’s pending sales were higher than in 2024.
Weekly housing inventory data
Last week, there was a small decline in inventory, with inventory falling slightly. Despite recent declines, healthy inventory growth in 2025 has helped stabilize home prices.
New listings data
New listings data peaked earlier in the year and have gradually declined since. Despite this, there is still slight year-over-year growth in 2025.
Price-cut percentage
In 2025, there have been more price reductions compared to the previous year, making the housing market more buyer-friendly. Recent data shows no growth in price cuts, indicating a more stable market.
The week ahead: Jobs week — if the government doesn’t shut down
This week brings the focus on jobs data, pending any government shutdown. The Fed has set a low bar for acceptable job growth, so any positive numbers are likely to be well-received. Additionally, there are scheduled speeches by Fed members and reports on pending home sales and home price indices.