Mortgage rates are expected to decrease by the end of this year, but any benefit for homebuyers could be offset by the performance of mortgage-backed securities. In recent years, uncertainty about inflation and the trajectory of mortgage rates has led investors to demand a higher yield for owning mortgage-backed securities compared to what they would get from buying 10-year Treasury bonds.
Mortgage-backed securities are investments composed of mortgage loans and, like bonds, pay interest to investors. The difference in interest, or yield, offered by each of these types of investments can be measured by looking at the spread between mortgage rates and yields on US government bonds. Historically, that spread averaged around 1.7% monthly
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