You want mortgage rates to fall, and the good news is, they’ve started to. The question now is whether the trend will last—and just how low they might go.
According to leading economists and Texas real estate professionals, there’s still room for mortgage rates to come down over the next year. One of the key indicators to keep an eye on is the 10-year Treasury yield, which has a long history of moving in tandem with mortgage rates.
The Connection Between Mortgage Rates and the 10-Year Treasury Yield
For more than five decades, the 30-year fixed mortgage rate has closely followed the movement of the 10-year Treasury yield. This yield serves as one of the most watched benchmarks for long-term interest rates.
When the yield climbs, mortgage rates typically rise. When it drops, mortgage rates tend to fall. It’s a consistent pattern that has held true for over 50 years.
Experts often measure the difference between these two numbers using what’s called the spread—the gap between the Treasury yield and mortgage rates. Historically, that spread averages about 1.76 percentage points, or 176 basis points.
The Spread Is Finally Narrowing
Over the last couple of years, that spread has been much wider than usual. Think of it as a reflection of uncertainty or fear in the market. When the economy feels unstable, lenders build in extra cushion to protect themselves, which widens the spread and pushes mortgage rates higher.
But there’s some encouraging news for buyers and sellers in the Texas real estate market. The spread is finally starting to narrow. That means confidence is slowly returning, and the path ahead is becoming clearer.
As the team at Redfin recently explained:
“A lower mortgage spread equals lower mortgage rates. If the spread continues to decline, mortgage rates could fall more than they already have.”
This shift could be a turning point for buyers who have been waiting on the sidelines.
The 10-Year Treasury Yield Is Expected to Decline
It’s not just the spread that’s improving. The 10-year Treasury yield itself is also expected to trend downward over the next several months. When you combine a falling yield with a narrowing spread, you get two major forces that could continue to bring mortgage rates down heading into 2026.
If this pattern holds, analysts predict mortgage rates could gradually settle into the mid-to-upper 5% range by the end of next year. That could significantly improve affordability and open up new opportunities for Texas homebuyers.
Here’s a quick example: if the 10-year Treasury yield is around 4.09% and you add the typical spread of 1.76%, you’d expect mortgage rates to sit near 5.85%. That’s a far cry from the rates we’ve seen over the past couple of years.
What It Means for Texas Real Estate
For buyers, this could be a great moment to start planning. Lower rates mean more purchasing power and less competition from hesitant buyers. For sellers, it could mean stronger demand as affordability improves.
The Texas real estate market, in particular, could see renewed activity. Cities like Dallas, Austin, and San Antonio have continued to draw interest because of job growth, lifestyle, and relative affordability compared to other parts of the country. As rates drop, those advantages will stand out even more.
Still, it’s important to remember that markets are unpredictable. Economic shifts, inflation reports, and job data can all influence where rates head next. The 2026 outlook points toward a gradual decline, but short-term bumps are inevitable.
Stay Informed and Work with a Trusted Professional
Keeping track of all these moving pieces can feel overwhelming. That’s why having an experienced Texas real estate agent or mortgage professional in your corner matters. They can interpret daily rate changes, explain how they impact your budget, and help you decide when it’s the right time to buy, sell, or refinance.
If you want real-time updates on where rates are headed and how that affects your local market, reach out to a trusted Texas real estate expert or lender today. Staying informed could make all the difference in your next move.