Zhao added that regardless of ingredient costs, a lower restaurant markup reduces the customer’s bill. Likewise, a lower mortgage spread helps reduce mortgage rates regardless of Fed actions.
Market conditions create buyer opportunities
The narrowing spread comes as analysts describe a buyer’s market. Many sellers have become more open to negotiations, including price reductions, as homes remain on the market longer.
Combined with declining rates, the current conditions may offer favorable timing for locking in lower monthly housing payments. The spread still has room to fall before reaching the typical range of 1.5 to 2 percentage points, suggesting potential for further rate decreases.
“It’s important to note that if the Fed cuts interest rates as expected in September—or more than expected—mortgage rates may fall more than anticipated because the spread is also falling,” Zhao said.
Real impact on purchasing power
The rate changes have created tangible benefits for potential buyers. A household with a $3,000 monthly budget can now afford a $439,000 home with the current average mortgage rate of 6.55%.