November 18, 2025 – The Spreads Are Narrowing

Economic Commentary

With all the talk of a rate cut in December, we harken back to a statement made by Federal Reserve Chairman Powell in a speech to the National Association of Business Economics in mid-October. In that speech the issue of ending quantitative tightening was on the horizon. As a reminder, in addition to setting very short-term interest rates, the Fed influences long-term interest rates through the size of their hefty balance sheet of assets such as Treasury and mortgage-backed securities.  For example, when the financial crisis hit in 2008, the Fed was aggressive in purchasing Treasuries and mortgages, helping to stabilize the markets.

Fast forward to our period of post-pandemic inflation during which the Fed implemented quantitative tightening by halting the purchases of these securities and letting the size of their balance sheet shrink  as these assets matured—or what is called – “run-off.” Along with higher short-term rates this move was made to help combat high inflation rates. Now that inflation is close to their 2.0% target (still a bit higher than that) and the economy and especially the job market is slowing down, the Fed is preparing to end quantitative tightening. This does not mean that the Fed will increase the size of their balance sheet, but they are more likely to keep the balance sheet stable by replacing securities that mature.

Why won’t the Fed start purchasing securities to force mortgage and other long-term interest rates down even quicker? Because they still see inflation as a threat. But just the mention of the end of this cycle has had a positive effect upon mortgage rates. There is typically a spread between 30-year mortgage rates and 10-year Treasuries.  For example, if the 10-year is at 4.0% and the 30-year mortgage is at 6.0%, we say the spread is 2.0%. During the inflation fight, the spread moved to as high as 3.0%, much higher than the historic spread of 1.75%.  Since the Fed made their announcement, the spread has continued to narrow. In other words, mortgage rates are falling independently of the Fed lowering short-term interest rates. The Fed’s change in policy is good news for homebuyers in the short and long-run.

Weekly Interest Rate Overview

The Markets. Mortgage rates did not change much in the past week, but with the government shutdown over, the markets are expecting a tsunami of data over the next couple of weeks which could determine the short-term direction of mortgage rates, as well as the next Fed decision in December. According to the Freddie Mac weekly survey, 30-year fixed rates rose to 6.24% last week from 6.22% the previous week. In addition, 15-year loans decreased to 5.49%. A year ago, 30-year fixed rates averaged 6.78%, 0.54% higher than today. Attributed to Freddie Mac: “Rates for the 30-year and the 15-year fixed-rate mortgage essentially remained flat this week, but purchase activity increased, which is encouraging.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

According to ResiClub’s analysis of the U.S. Census Bureau’s new annual data, 40.3% of U.S. owner-occupied housing units are now mortgage-free, marking a new high for this data series. That’s up from 39.8% in 2023. The portion of homeowners with no mortgage has ticked up almost every year since 2010—when it was 32.8%.  A key factor driving the rise in mortgage-free homeownership is demographics. Older homeowners are more likely to be mortgage-free, and as Americans live longer and the massive baby boomer generation ages into their senior years, the U.S. population has skewed older—pushing up the share of homeowners without mortgages. According to ResiClub’s analysis, 54% of the 35 million U.S. homeowners who are mortgage-free are 65 years old or older.  People aged 65 and older make up more than a third (34.1%) of current U.S. homeowners. Among those 65 and older, 64% own their primary homes free and clear.  Across the country, mortgage-free status varies A LOT. Regions with lower home values and areas with a higher proportion of older populations tend to have a slightly higher percentage of homeowners without mortgages.  In the years ahead, ResiClub expects more equity products (such as reverse mortgages) to emerge and expand, as some older mortgage-free homeowners look to tap into the equity they’ve built without selling their homes.  Source: Fast Company

The greatest generational wealth shift in history has already begun. Baby Boomers, the largest retirement generation to date, will finish shifting up to $105 trillion to heirs by 2048. And according to a recent LegalZoom survey*, 62% of what will be left behind is anticipated to be real estate or property. But rising home maintenance costs could pose a problem for younger generations. For instance, property values have increased “almost 27% faster than inflation since 2020,” per the Tax Foundation. And with higher home valuations, heftier property tax bills typically follow. So, will the inherited wealth be enough to support the higher costs of homeownership? Or will heirs need to sell priceless heirlooms to stay afloat?  While 62% of the older generation (aged 45 and above) surveyed by LegalZoom expect to leave behind real estate to their loved ones, only 18.6% of younger Americans in the survey actually feel “very prepared” to maintain an inherited property.  While talking about wills and estates with your heirs may be uncomfortable, it’s important to take the time now to discuss what the future looks like for your family.   If your heirs aren’t very liquid, you may want to talk about the possibility of selling certain assets in the near future. You may also want to offer advice on which investments could be the best fit for their financial situation. Remember: some of the greatest wealth you can pass on to future generations is the wisdom you’ve learned through your own journey, and not just the assets themselves. Source: Kiplinger

As renters explore their housing opportunities, an increasing number of property managers are finding they must adjust on the fly to keep pace with renter expectations. SmartRent Inc., a provider of smart community solutions and smart operations solutions for the rental housing industry, has released the results from a recent survey focused on energy management trends across rental housing. Conducted in partnership with Morning Consult, the survey found that renters are increasingly prioritizing energy-efficiency and cost-saving technologies when choosing a home. As utility costs continue to rise–the price of electricity alone is up 34% since 2020—92% of survey respondents said that reducing their monthly utility expenses is “very important” or “somewhat important” when it comes to choosing a place to live. Sustainability is also a strong motivator, with 75% of renters polled stating that it is important to them to reduce their environmental impact. “Renters expect property management companies to help limit their utility bills through the use of smart home solutions and energy-efficient property technologies,” said Frank Martell, President and CEO of SmartRent.  More than 63% of survey respondents reported experiencing a utility bill increase over the last year, with 35% of those who saw an increase reporting hikes of more than $51 per month. An additional 76% of respondents are “very concerned” or “somewhat concerned” about their utilities increasing over the next year, adding a layer of economic stress that they are eager to mitigate.  Approximately 32% of survey respondents said they would be willing to pay more for rent if reduced utility costs meant their overall monthly spending remained the same. An additional 33% said they would pay more in rent if the unit was energy-efficient and offered consistent savings.  Source: SmartRent