How Mortgage Rates Could Fall Further

If you’ve been keeping an eye on mortgage rates lately, you may have noticed a lot of talk about the 10-year Treasury yield and how it ties into housing affordability. It can sound like Wall Street jargon, but it really does matter to anyone thinking about buying, selling, or refinancing a home. Let’s break it down.

The Connection Between the 10-Year Treasury and Mortgage Rates

Even though we call it a 30-year mortgage, most homeowners don’t actually keep the loan for three full decades. People refinance, sell, or move long before then. That’s why investors treat the 10-year Treasury bond as the best benchmark for mortgage rates—it closely matches how long the average mortgage stays outstanding.

Lenders price mortgages at a spread above the 10-year Treasury yield. Historically, that spread has been around 1.5% to 2.0%. So, if the 10-year Treasury yield is around 4%, you would expect 30-year mortgage rates to fall somewhere between 5.5% and 6%.

Lately, though, that spread has been much wider—closer to 3%. This has kept mortgage rates higher than what history suggests they should be. The good news? If the 10-year Treasury yield holds near 4% and spreads return to normal, we could see mortgage rates dip below 6% again.

Why 6% Is the Tipping Point

In my opinion, 6% is the magic number for mortgage rates. If rates drop below that line, more homeowners will feel comfortable listing their homes. And since most sellers are also buyers, that shift could unlock more inventory and create more activity across the market.

I believe this theory has already been proven. Homebuilders, eager to move inventory over the past couple of years, offered incentives that “bought down” mortgage rates below 6%. When they did, homes sold quickly. The demand was there—it just needed the right rate environment to unlock it.

And we may already be seeing this play out. Just yesterday, I saw it reported that in Central Iowa, you could lock in a 30-year mortgage at 5.99%. That’s a number that gets people’s attention—and it could be the spark that starts loosening up our housing market.

📍 Local Insight: Why Central Iowa Rates Run Lower

If you’ve noticed that mortgage rates here in Central Iowa often come in a little lower than the national averages you see on the news, you’re right. Local lenders and credit unions compete hard for business, operating with lower overhead than national banks. Our housing market is also more stable, with fewer risky “jumbo” loans compared to high-priced coastal markets. That lower risk profile allows lenders to offer slightly better rates—one of the quiet advantages of living and buying a home in Iowa.

Why the Jobs Report Matters

So, how does the jobs report fit into this story? Every month, the government releases data on how many jobs were created and what the unemployment rate looks like. A strong jobs report means the economy is still running hot—businesses are hiring, wages are growing, and inflation pressures may stick around.

The Federal Reserve watches this data closely. If job growth stays strong, the Fed feels less pressure to lower its short-term interest rate. That keeps borrowing costs across the economy higher—including mortgages.

On the other hand, if the jobs report comes in weaker—showing fewer jobs being added or unemployment ticking higher—that gives the Fed more confidence to start cutting interest rates. And once the Fed signals a rate cut, Treasury yields usually move lower, which in turn pulls mortgage rates down.

In short:

Strong jobs numbers → Fed holds rates higher → mortgage rates stay elevated. 

Weaker jobs numbers → Fed cuts rates → mortgage rates drop.

Looking Ahead

We’re in a waiting game: the 10-year Treasury yield is already trending lower, but for mortgage rates to truly break through the 6% barrier, we’ll need to see the jobs data soften enough for the Fed to begin cutting rates.

And when that happens, watch for a chain reaction: more sellers listing their homes, more buyers entering the market, and a housing landscape that feels a lot more balanced.

👉 Thinking about buying or selling in this shifting rate environment? Let’s talk strategy. I can help you understand what these changes mean for your situation—and how to make your next move with confidence.

As a Broker Associate/REALTOR® at EXIT Realty and Associates, I specialize in buying and selling real estate throughout Central Iowa, including Norwalk, Des Moines, West Des Moines, Cumming, Indianola, Carlisle, Waukee, Urbandale, Grimes, Clive, Johnston, Ankeny, Altoona, and Pleasant Hill. I proudly serve Warren, Polk, Dallas, and Madison Counties.

💬 Get honest, straightforward real estate insight from someone who knows Central Iowa. Call me, Jon Niemeyer, at 515-490-4675 — no pressure, just perspective.