Why are mortgage rates so high when Treasury yields are falling? Since early October the 10-year Treasury yield has dropped about four times as much as the 30-year mortgage rate, which Freddie Mac still put at 7.18% last Thursday.

The reason is the gap between the two. It has gotten wider, and it’s now wider than in seven weeks out of eight since 1971. If it were its usual size, today’s mortgage rate would be closer to 6.51%.

A mortgage rate is two numbers stacked

The bottom part is the 10-year Treasury yield, what investors earn for lending to the government. Mortgages follow it rather than a 30-year bond because few 30-year loans run their full term. People sell or refinance, and Wolf Street puts the average life of a mortgage at about 12 years.

The top part is the gap. It pays for what a Treasury bond doesn’t carry: a fee Fannie Mae and Freddie Mac charge to guarantee the loan, the lender’s own margin, and your right to pay the loan off early.

This week’s gap is wide; the dotted line is the rate with the usual gap.

Source: Freddie Mac, Federal Reserve, via FRED; calculated by MKViz.

That last right costs more than it sounds. If rates fall, you refinance, and the investor holding your loan gets paid back just when they’d rather keep it. Much of what’s left after the guarantee fee and the lender’s cut is the price of that risk, argues Paul Willen of the Boston Fed in a May study, and investors charge more for it when rates jump around.

I didn’t think of my own rate as stacked parts until I shopped for a mortgage in 2023. Each lender’s sheet showed a base rate I couldn’t change, a margin on top, and discounts if I met certain conditions. The base was the same everywhere. The margins were not.

What widened the gap this fall

For most of the past year, mortgage rates rose because Treasury yields rose. This fall the two came apart:

The Treasury yield fell; the mortgage rate mostly didn’t.

Week	10-year Treasury	30-year mortgage	Gap
Sept. 10	4.95%	6.76%	1.81 points
Oct. 1	5.24%	7.28%	2.04 points
Nov. 5	4.84%	7.18%	2.34 points

Source: Freddie Mac, Federal Reserve, via FRED; calculated by MKViz.

In early September the gap was near the level Wolf Street called stuck for months. It widened after the Fed raised its rate in September and yields lurched up and back down.

The Boston Fed study points to two forces that move the gap. A steeper yield curve, with long-term rates well above short-term ones, tends to shrink it. Bigger expected swings in rates tend to widen it. The curve hardly changed this fall, which points to the swings.

Wolf Street adds a slower pull. The Fed keeps letting its old mortgage bonds run off without buying new ones. Fannie Mae and Freddie Mac have bought back some of their own, but with fewer buyers overall, the ones left can ask for more. What they ask for ends up in your rate.

How long have wide gaps lasted?

If a stretch does start, the record says to be patient. Since 1971 the gap has stayed wide for three months or more only a handful of times, but when it did, the typical stretch lasted about nine months. The longest ran from mid-2022 to late 2025:

Stretches when the gap, averaged over 13 weeks, stayed above 2.20 points.

Stretch	Months
1980	four
1981 to 1983	25
1986	nine
2008 to 2009	nine
2020	six
2022 to 2025	41

Source: Freddie Mac, Federal Reserve, via FRED; calculated by MKViz.

Even the Fed buying mortgage bonds didn’t make a wide gap vanish quickly. It bought in both 2008 and 2020, and the 2020 stretch still lasted half a year. The long one that ended last year faded as rates calmed down.

We aren’t in a stretch yet. The weekly gap is above the line, but its three-month average is still below it. That average is the highest since January.

What the gap costs, and the part you can shrink

On a loan of about $314,640, enough for the median-priced new home sold this summer with 20% down, the wider gap adds about $141 a month. Put that next to the rate cuts people wait for, and the gap alone is worth more than a half-point drop:

A gap back at its usual size saves more each month than a half-point rate cut.

Source: Freddie Mac, Census, via FRED; calculated by MKViz.

For first-time buyers, who already pay far more than in 2021, that extra comes on top of everything else.

You can’t move the Treasury yield or the market’s price for the right to refinance. The lender’s margin is different, because it varies from lender to lender. In 2022 the spread between lenders’ quotes more than doubled, Freddie Mac found, and borrowers who got four or more quotes could have saved over $1,200 a year.

That matches what I saw. I picked a lender whose margin was a fifth of a point lower than the others, and to get it I set up direct deposit and a few autopays. Over the life of the loan, that small slice adds up to thousands of dollars.

What I’d do differently is the waiting. Through 2022 I told myself I’d buy when rates came down. They rose more than a point instead, and I ended up with a payment about a third higher than if I’d bought in the fall of 2021.

So now I don’t wait for rates to fall in general. I decided ahead of time how big a drop would make a refinance worth it, and the curve above is how I’d read it. Find the drop on the bottom, read the monthly saving, then divide the closing costs a lender quotes you by that saving. That’s how many months a refinance takes to pay off.

Sources

Method: For every weekly Freddie Mac 30-year fixed rate since April 1971 we subtracted the 10-year Treasury yield on the same day (or the last trading day before it) and measured where this week's gap sits among all weeks, its median, and every stretch when its 13-week average stayed above 2.2 points for three months or more. Monthly payments are principal and interest on the third-quarter 2026 median sale price with 20% down. Data: Freddie Mac, Federal Reserve and Census via FRED. Code and data

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