The spread between yields on 10-year Treasury bonds and 30-year fixed mortgages averaged 220 basis points in October, the narrowest margin since the Federal Reserve ended its purchases of residential mortgage-backed securities in early 2022.

The latest monthly mortgage performance report from ICE Mortgage Technology indicates the tightening spreads have helped offset any impact of rising 10-year yields on mortgage rates following last month’s 25-basis-point cut to the fed funds rate.

Mortgage rates easing to their lowest levels in more than a year led to a nearly 15% rise in prepayments in October, as “in the money” borrowers with loans originated largely between 2023 and 2024 lowered monthly payments with refinances.

The nationwide delinquency rate fell two basis points as of the end of September. The greatest loan weakness continues to emerge among borrowers with balances insured by the Federal Housing Administration (FHA), with those delinquencies now accounting for 47% of total delinquencies and 52% of those 90 days or older.

Though the roughly 21,000 foreclosure sales in the third quarter were about half of 2019 levels, they marked an 18% rise from last year. ICE reports that FHA loans drove the increase, comprising 38% of active foreclosures and 80% of the rising active foreclosures.

Four Florida markets and two Texas markets made the list of 15 states with the rapidest climb in annual foreclosure rates: Cape Coral (57%), Tampa (50%), Deltona (50%) and Jacksonville (47%) in Florida, and Houston (88%) and Dallas (53%) in Texas.

“Given the sensitivity to modest rate movements in their current range, borrower refinancing behavior will be worth watching closely in coming weeks for impacts on lending volumes and prepayments among recently originated loans,” the report concluded.

Fannie Mae’s chief financial officer, Chryssa Halley, recently noted in a third-quarter earnings call that the next refinance wave would be unlikely to occur until mortgage rates drop below 5%, when today’s market-rate borrowers may discover savings.

ICE reports that single-family home prices rose 1.2% annually in October, while condo prices declined 1.8% year over year. Price gains were concentrated in the Northeast, particularly in New York, Connecticut and Pennsylvania, with price declines concentrated in Florida, Texas and Colorado.