Mortgage Rate Flow: 6% Threshold Holds, Liquidity Tight

Mortgage money is flowing at a standstill. The 30-year fixed-rate average has stabilized just above the critical 6% psychological threshold, showing no clear directional bias. As of February 5, the rate stood at 6.11%, edging up slightly from the prior week. This places it in a tight trading range, having only just touched its 52-week low of 6.06%. The market is essentially stuck, with liquidity for new purchases not yet finding a decisive path.

The premium for refinancing highlights the current market's fragility. The average rate to refinance a 30-year fixed loan is 6.27%. This 16-basis-point spread over the purchase rate signals that lenders are charging a higher cost for the transaction, likely due to increased risk assessment or administrative friction. It also reflects the "lock-in effect," where a large cohort of homeowners with sub-6% rates are reluctant to refinance, keeping overall refinance volume muted.

The bottom line is a market in equilibrium. With the 30-year rate hovering near 6.11% and the 52-week low just 5 basis points below, there is no immediate pressure for a move higher or lower. The slight weekly uptick and the persistent refinance premium indicate that while the worst of the rate shock may be over, the flow of mortgage capital remains constrained.

The Macro Engine: Treasury Spreads and Fed Policy

The 10-year Treasury yield is the primary pricing cap for mortgage money, and it has held firm above 4.2% since mid-January. This level acts as a direct ceiling, dictating the minimum cost of capital for lenders and directly capping how low mortgage rates can fall. The 30-year fixed average of 6.11% is a function of this spread, and its recent stability reflects the Treasury's lack of a decisive move lower.

The Federal Reserve's policy easing has been a key macro driver, but its impact is now priced in. The central bank delivered three consecutive 25-basis-point cuts in 2025, with the final reduction in December bringing the target federal funds rate to 3.50%-3.75%. This shift toward a more accommodative stance was intended to support growth and employment, and it did help push mortgage rates from their January 2025 peak near 7.05%. However, the market has digested this easing, and the current rate plateau suggests further Fed action is not the immediate catalyst.

A positive signal for liquidity is the narrowing spread between Treasuries and mortgage rates. This compression indicates that the market for mortgage-backed securities (MBS) is improving, with lenders finding it easier to source capital. The fact that the 30-year rate has resisted a substantial move higher despite the Treasury floor suggests underlying demand and liquidity are holding. This dynamic is critical for flow; a tighter spread reduces the cost of issuing new mortgage loans, which could eventually feed through to lower rates for borrowers.

The Demand Flow: Elasticity Below the Switch

Borrower behavior is highly sensitive to rate movements, as shown by Rocket Mortgage's data. A typical 30% surge in demand occurs when rates fall below the 5.99% psychological switch point. This highlights a market where demand is latent, waiting for a clear catalyst to move from the sidelines.

The current rate of 6.11% as of February 5 places the market firmly below that 5.99% threshold. In theory, this should trigger a demand response. Yet the market remains stuck, indicating that other factors-like affordability constraints or the lock-in effect-are currently outweighing the rate incentive. The stability near 6% suggests supply and demand are in a state of equilibrium.

The bottom line is a market in balance. With rates below the key switch point but no significant demand surge materializing, the flow of mortgage capital lacks a decisive trigger. This balance, sustained by the Treasury floor and improving MBS spreads, means there is no immediate pressure for a substantial rate move in either direction.