Episode summary
Can mortgage spreads get worse from here?
HousingWire Daily
· · 22 min · Hosts: Sarah Wheeler · Guests: Logan Mohtashami
Summary
Logan Mohtashami argues that mortgage spreads, not just the 10-year Treasury yield, are the main reason mortgage rates have stayed below 7% this year. He says the spread has compressed enough that even with a volatile week, rates remain well below the levels that would normally be implied by the bond market. In his view, that matters because housing activity can still improve if rates get closer to 6%, but the market struggles when rates move above 7%.
He traces the recent spread widening to the 2023 Silicon Valley banking crisis, which pushed spreads above 3% and helped mortgage rates spike to around 8%. Since then, he says spreads have steadily normalized and are now closer to 160 to 180 basis points, with the worst recent levels still below the extremes seen in 2023, 2024, and 2025. Logan says the current environment is unusual because oil, conflict headlines, and Fed noise have not yet forced spreads materially higher.
Looking ahead, he says spreads could worsen if there were a banking crisis, a sharp job-loss recession, or a more aggressive Fed tightening cycle. But he thinks those risks are not the base case right now, and that the Federal Reserve has tools to stabilize markets quickly if needed.
Key takeaways
- Logan Mohtashami says mortgage spreads are the key reason mortgage rates have stayed below 7% even with the 10-year yield elevated.
- He says the 2023 Silicon Valley banking crisis pushed spreads above 3%, creating the spike that helped mortgage rates reach about 8%.
- Mohtashami argues spreads are now closer to normal at roughly 160 to 180 basis points, which is why mortgage rates are less restrictive than in 2023-2025.
- He says spreads could get worse if there is a banking crisis, a job-loss recession, or a much more aggressive Fed, which could quickly push mortgage rates toward 7.5%.
- Mohtashami says conflict headlines alone are not enough to widen spreads the way a banking or credit event would.
Notable quotes
“still to this day, because of mortgage spreads, rates have stayed below 7% the entire year”
“If you can get down to neutral policy, it's easier to trade between 380 and 420 on the on the 10-year old”
“the spreads were were bad and we weren't at neutral policy yet”
“I think we got down to 181 at one point”
“if it does get worse, guys, then you your your rate things could go up a lot higher”
How the episode opens
Welcome everyone. I'm joined today by lead analyst Logan Mohtashami to talk about whether mortgage spreads will get worse and what that could mean for mortgage rates. Before we dive in, here are the top five trending articles on housingwire.com.
First is HUD sets one-year statute of limitations on fair housing construction violations. Followed by House Republicans outline a plan to overhaul the CFPB. Then we have eXp ends mortgage JV with Kind Lending, eyes new res deal.
And immigration enforcement tightens squeeze on home builders' job sites. Finally, we have Compass NWMLS settlement is bigger than coming soon listings. We've got a lot to talk about, so let's dive in.
Logan, welcome back to the podcast.
It is wonderful to be here. What a crazy week, right? We had a lot of stuff.
I created like an AI thing about like a robot telling me to stop looking at the bond market at 12:00 at night. It takes my photo away, it punches me out, and you know, and um we had some events Thursday morning. Of course, by the time this podcast comes out, it drops Friday, it'll be up, but uh Fed Governor Waller kind of said, "Hey, listen, I might not be into a hike if inflation, the month-to-month data prints is soft.
Kind of like what he said before. Uh even though oil prices went up a little bit, and that chart does not look good. Um the 10-year yield fell four or five basis points lower.
So, in this crazy volatile week with a lot of crazy headlines, the 10-year yield has not been able to push up higher. Uh and uh jobs Friday will be the final test of that. And still to this day, because of mortgage spreads, rates have stayed below 7% the entire year, even though the 10-year yield is not that far off from the uh yearly or cycle high at least around 5% in 2023.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- mortgage spreads
- mortgage rates
- rate outlook
- mortgage market
Companies and tickers mentioned
- HousingWire
Watch the episode
Watch “Can mortgage spreads get worse from here?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from HousingWire Daily
-
The headlines impacting mortgage rates -
Has housing demand already changed with lower rates? -
How midterms and jobs week will affect rates -
Preparing for Q1 growth in reverse mortgages -
A clear pathway to sub-7% mortgage rates for Thanksgiving? -
Mortgage rates, inflation and those homeowner vacancy numbers
HousingWire Daily, this episode and its artwork belong to HousingWire. Octagon is not affiliated with the show; this page is an independent summary.
