Mortgage Spread.
In plain English
The mortgage spread is how much higher mortgage rates sit above the 10-year Treasury yield, the benchmark they track. Treasuries are considered risk-free, so lenders charge more to cover the added risk and cost of a mortgage, including the chance you refinance or default. The spread widens when lenders are nervous or markets are volatile, which can push mortgage rates up even when Treasury yields are flat. Watching the spread explains moves in mortgage rates that the Treasury market alone does not.
01Why it matters
The mortgage spread is why mortgage rates sometimes rise even when Treasury yields hold steady, so it helps explain confusing headlines about home-loan costs.
02The math, step by step
The 10-year Treasury yields 4 percent and mortgages are at 6.5 percent, a 2.5 percentage point spread. If lender caution widens that spread to 3 points, mortgage rates rise to 7 percent with no move in Treasuries.
03What this is NOT
The mortgage spread is NOT the rate you pay. It is the gap between mortgage rates and Treasury yields, one of two pieces (the other being the Treasury yield itself) that add up to your rate.