Short answer. The mortgage rate spread is the difference between 30-year fixed mortgage rates and 10-year Treasury yields. The historical average is approximately 175 basis points; in 2023-24 the spread reached 280-300 basis points — the widest since the 2008 crisis.
The mortgage rate spread (also called the "primary-secondary spread" or "MBS spread") is one of the most-watched metrics in U.S. mortgage finance. It captures the cost of credit risk, prepayment risk, and market-functioning factors that determine how much above the risk-free Treasury rate borrowers actually pay.
How the spread is calculated
- 30-year fixed mortgage rate (Freddie Mac PMMS)
- Minus: 10-year Treasury yield (Fed H.15 series)
- Equals: Mortgage rate spread (in basis points)
Historical context
The long-run (1971-2024) average spread is approximately 175 basis points. Periods of stress widen the spread; periods of liquidity narrow it.
- 2003-2007 (pre-crisis): ~165 bps average
- 2008-2009 (crisis): peaked at 380 bps
- 2010-2019 (post-crisis QE era): ~175 bps
- 2020-2021 (Fed MBS purchases): ~140 bps
- 2022-2024 (QT era): 250-300 bps
What drives the 2022-24 widening
Three factors. First, the Federal Reserve's quantitative tightening, which began in June 2022, gradually reduced Fed MBS holdings — removing the largest marginal MBS buyer. Second, prepayment-risk concerns: with sub-3% mortgages outstanding, MBS investors faced unusual prepayment uncertainty. Third, regional-banking stress in 2023, which led several major MBS investors to reduce position sizes.
What this means for borrowers
If the mortgage spread normalizes to 175 bps from 2024's ~280 bps, mortgage rates would fall by roughly 100 basis points without any change in Treasury yields. A 5.84% mortgage rate (rather than 6.84%) would unlock meaningfully more buying power and listing inventory.
Sources
U.S. Census Bureau Survey of Construction; National Association of Realtors Existing Home Sales report; Freddie Mac Primary Mortgage Market Survey; National Bureau of Economic Research Business Cycle Dating Committee.