Why Experts Expect Mortgage Rates To Ease — and What It Means for the South Bay
If you live in the South Bay, you’ve probably felt the tension between wanting to move and waiting for mortgage rates to calm down. Good news: the shift is already starting. And as someone who watches Santa Clara County housing data as closely as some people watch Warriors highlights, I can tell you—this trend matters.
Over the next year, experts expect mortgage rates to ease. The key indicator? The 10-year Treasury yield, a benchmark that has reliably predicted rate movement for decades.
The Link Between Mortgage Rates and the 10-Year Treasury Yield
For more than 50 years, the 30-year fixed mortgage rate has followed the 10-year Treasury yield almost like clockwork. When the yield rises, mortgage rates rise. When it falls, mortgage rates tend to soften.
That relationship has been incredibly consistent, and the difference between the two—known as the spread—normally sits around 1.76%. But lately, that spread has been unusually wide.
Think of the spread as a real-time “fear meter” for the economy. More uncertainty = a wider spread. This has kept mortgage rates higher than usual, even here in the South Bay real estate market where demand rarely sleeps.
The Spread Is Shrinking — A Positive Sign for Buyers and Sellers
Here’s the encouraging part: the spread is finally narrowing again. We’re seeing more clarity in the economic outlook, and the housing market is responding.
Redfin recently put it simply:
A smaller spread = lower mortgage rates.
I’ve felt this shift on the ground. Buyers in Cupertino and Sunnyvale who pressed pause earlier this year are slowly stepping back in—not because rates are low yet, but because they sense momentum. And sellers in Santa Clara are starting to price with more confidence, knowing buyers are gaining breathing room.
Why Analysts Expect Rates To Ease Into 2026
It’s not just the spread that’s improving. The 10-year Treasury yield itself is expected to decline in the coming months. Combine the two—lower yield + smaller spread—and you get a path toward potentially lower mortgage rates.
If we take today’s 10-year yield (around 4.09%) and add the historical spread, we’d expect mortgage rates near 5.85%. We’re not there yet, but this is why some analysts see a chance for rates dipping into the upper 5s late next year.
Of course, everything still depends on the economy, jobs data, and inflation. But overall, the 2026 outlook shows a gradual easing—welcome news for anyone trying to buy a home in Santa Clara, Sunnyvale, Cupertino, or San Jose.
Bottom Line: You Don’t Have To Navigate This Alone
Tracking interest rate trends can feel like solving a puzzle with missing pieces. That’s where having a trusted local advisor matters.
My role—as a “doctor for real estate decisions”—is to diagnose your situation, look at the data with clarity, and guide you toward the right plan for your next move in the South Bay.
If you’ve been wondering whether to re-enter the market or start planning your next step, let’s talk. I’ll walk you through the numbers and create a personalized strategy based on today’s South Bay housing trends.
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