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10-Year Treasuries Drop-Are Rates Dropping?
Seems like the 10-year Treasuries are dropping; does that mean par mortgage rates on conventional, FHA, VA, USDA, and non-QM loans have dropped? Do borrowers with under 640 FICO credit scores still have to pay discount points?
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Are Mortgage Rates Starting to Decline as 10-Year Treasury Yields Fall? What Impact Does This Trend Have on Borrowers with FICO Scores Below 640?
October 26, 2026 – National Mortgage Market Update
The recent drop in 10-year U.S. Treasury yields has improved the outlook for mortgage rates. However, not all conventional, FHA, VA, USDA, or non-QM loans are showing lower base rates yet. If your FICO score is below 640, you may still need to pay discount points to get a good rate, especially if your risk profile is higher.
10-Year Treasury Yields Are Falling, but Mortgage Rates Are Still Elevated
The 10-year Treasury yield peaked at around 5.31% in early October, then dropped to about 5.00% by October 26, 2026. This drop is good news for buyers and homeowners who want to refinance. Mortgage rates have not dropped as quickly or as much as Treasury yields.
According to Freddie Mac’s October 22 weekly survey, the average 30-year fixed mortgage rate fell from 7.40% to 7.32%. This is a positive change, but rates are still much higher than they were earlier this year.
Mortgage rates usually track Treasury yields but are also influenced by mortgage-backed securities, investor demand, servicing costs, and risk factors. When Treasury yields fall, mortgage rates can fall too, but that doesn’t guarantee lower rates or closing costs for everyone. A true par mortgage rate means you do not pay discount points or get lender credits before other fees or price changes.
Cost Improvements on Mortgage Rates
Sometimes, lenders may offer a better deal by lowering interest rates without increasing upfront costs, or by reducing the number of discount points required to achieve the same rate. For example, a borrower who was quoted 7.25% with two discount points might later get a quote of 7.25% with one discount point. Even though the rate stays the same, this is a real cost improvement.
Mortgage-Backed Securities
Mortgage-backed securities may weaken even as Treasury yields fall. Are VA, USDA, Conventional, and Non-QM rates improving? Rate improvement depends on the loan program. For conventional loans, borrowers with strong credit, lower loan-to-value ratios, and solid underwriting profiles usually have more pricing options.
Loan-Level Pricing Adjustments
Borrowers with credit scores between 620 and 639 may face loan-level price adjustments depending on the transaction and exceptions. These adjustments may result in cash discount points. FHA financing remains available to individuals with scores below 640, including those with scores as low as 500. However, lower credit scores can affect investor pricing, underwriting requirements, and lender acceptance.
FHA does not require all borrowers with scores below 640 to pay discount points. The VA does not set minimum credit scores, interest rates, or discount points. A veteran with a 580 or 620 score may qualify if an investor accepts that profile, but pricing will differ significantly from that offered to veterans with excellent credit.
The USDA Single Family Housing Guaranteed Loan Program does not specify a minimum credit score. Each lender sets its own interest rates and credit criteria. While lower Treasury yields may improve USDA pricing, borrowers with scores below 640 should not expect zero-point financing.
Pricing on Non-QM Loans
Non-QM pricing is typically influenced by investor demand, credit profile, down payment, property type, and documentation. For products such as bank statement or DSCR loans, pricing may not improve as quickly as for conventional or government-backed loans. Some non-QM investors require a minimum credit score above 640.
Mortgage News for 26th October 2026?
Published national estimates can vary because of differences in provider samples, assumptions, and how points are counted. A market report from October 26 gave approximate 30-year mortgage purchase averages. These numbers are market averages, not confirmed par quotes for individual borrowers, and do not show rates available to borrowers with FICO scores below 640. It is not always true that borrowers with FICO scores below 640 pay discount points.
Higher pricing can stem from several factors, such as a low FICO score, high loan-to-value or debt-to-income ratios, cash-out refinancing, non-QM documentation, or limited investor competition.
For example, a borrower with a 580 FICO score might get a quote from one lender that requires two discount points, while another lender could offer a higher rate with no points. Neither choice is always better; the best option depends on the borrower’s monthly payment goals, available cash for closing, seller credits, and how long they plan to keep the mortgage. One discount point equals 1% of the loan amount, so for a $300,000 mortgage, two points would cost $6,000 plus other closing costs.
Will Lower Treasury Yields Eventually Eradicate the Discount Points?
If Treasury yields keep falling, mortgage-backed securities may become more valuable, and mortgage spreads may narrow. This could lead to lower interest rates and fewer discount points for borrowers. Zero-point pricing could become more common, especially for people with FICO. Mortgage brokers should review actual wholesale rate sheets rather than relying solely on national mortgage averages. By comparing the same loan with zero, one, and two points, they can better decide if paying discount points makes sense.
Are Discount Points Worth It
The recent drop in 10-year Treasury yields is a good sign for mortgage affordability. However, a stronger bond market does not guarantee lower base rates for every mortgage type. Each loan type—conventional, FHA, VA, USDA, and non-QM—responds differently to changes in the market, investor risk, and borrower profiles.
For people with scores below 640, the key question is not just whether rates have dropped but whether pricing has improved enough to lower rates, remove discount points, or cut overall costs.
Do not assume a FICO score under 640 always means paying points. Watching Treasury yields, mortgage-backed securities, and national rates can help you see when real improvements might help low-FICO borrowers.
Alert me when mortgage pricing improves for borrowers with FICO scores below 640.
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