Report
Why Mortgage Rates Exceed Treasury Yields
Abstract: The mortgage spread—the gap between the 30-year fixed mortgage rate and the yield on 10-year U.S. Treasury notes—is currently about 200 basis points, or 2 percentage points. Mortgages and Treasury securities have different cash flows, credit risk, and lender intermediation margins, but even after those differences are accounted for, a large and volatile gap remains. In this brief, the author argues that this remaining gap largely reflects the price of the mortgage prepayment option—a borrower’s right to pay off their mortgage at any time without incurring a penalty.
Access Documents
File(s):
File format is text/html
https://www.bostonfed.org/publications/current-policy-perspectives/2026/why-mortgage-rates-exceed-treasury-yields.aspx
Description: Summary
File(s):
File format is application/pdf
https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2026/cpp20260519.pdf
Description: Full text
Authors
Bibliographic Information
Provider: Federal Reserve Bank of Boston
Part of Series: Current Policy Perspectives
Publication Date: 2026-05-19
Number: 26-3