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Falling Mortgage Spreads Are Supercharging Buying Power in South Orange County

September 21,2025 | Posted By Gary Macrides in Financial
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If you're keeping an eye on the housing market in South Orange County — especially coastal gems like Dana Point, Laguna Niguel, and San Clemente — there’s good news: shrinking mortgage spreads are opening up new windows of opportunity for buyers.

What Are Mortgage Spreads, Anyway?

In simple terms, the mortgage spread is the difference between what lenders pay to borrow money (think: bond yields, Treasurys, etc.) and what they charge you as a homebuyer. When those spreads narrow, lenders can offer better rates. That means your monthly payment goes down — or you can afford a more expensive home for the same payment.

Recent trends show that mortgage rates are coming off their highs, driven by lower Treasury yields, easing economic indicators, and anticipation of Fed policy adjustments.

What’s the Current Rate Landscape in Southern California?

  • For California, the average 30-year fixed mortgage rate is now in the 6.4–6.6% range. 

  • Locally, in Orange County, some lenders are offering 30-year fixed conforming loans around 5.75-6.00%, depending on credit, down payment, and the specific loan program.

  • Adjustable-rate options (ARMs) or shorter-term fixed mortgages are even more attractive in many local scenarios. 

So, while rates are still higher than the ultra-low levels of early 2020–21, the drop over the last few months is meaningful. Buyers who were being squeezed by prior rates are suddenly seeing some breathing room.

How This Helps Buyers in Dana Point, Laguna Niguel & San Clemente

Coastal and near-coastal communities in South OC carry premium tag prices. Because of that, even small shifts in interest rate spreads can move the needle significantly on what mortgage payment someone can comfortably afford. Here’s how:

  • Increased Affordability: Let’s say you were looking at a $1,200,000 home. A drop from, for example, 6.75% to ~6.00% (or slightly less) could shave hundreds of dollars off your monthly payment. That may allow you to stretch further on price, put more home quantity or quality into your budget.

  • More Eligible Buyers: People who were “on the edge” — maybe their qualifying payment exceeded their comfort zone — are suddenly back in the game. Whether you're considering upgrading, downsizing, moving closer to the coast, or buying inland, lower spreads make it more realistic.

  • Potential for Better Deals: Sellers in these high-demand areas might adjust pricing or terms when they see buyers having more leverage. Buyers who act with pre-approval, flexibility, or ability to close fast may gain advantage.

  • Refinancing Gains Too: If you already own in one of these coastal or premium South Orange County towns with a mortgage rate above 7%, refinancing now could free up cash monthly — money that could go into renovations, paying down debt, or shifting into a bigger or better-located property.

What to Watch & Do If You’re Considering Buying

If you're thinking about buying or moving in Dana Point, Laguna Niguel, or San Clemente, here are strategies to take advantage of these improving mortgage spreads:

  1. Lock in rates wisely. They may continue to edge down, but also could reverse — so get pre-approved, and use trusted local lenders who can give you accurate quotes including fees and points.

  2. Compare fixed vs adjustable: Given the kinds of price points in these areas, sometimes an ARM or shorter fixed term can offer lower initial payments. Understand the trade-offs (how long you plan to stay, risk tolerance).

  3. Factor in all carrying costs: Between HOA, insurance, maintenance, coastal regulation, etc., the interest rate is just one piece of the puzzle. Use creative budgeting.

  4. Timing & supply: Inventory in coastal South OC tends to be tight. Even with more buying power, you’ll want to move fast when a good property appears.

  5. Work with local realtors/lenders: Agents and lenders who know the neighborhoods — Dana Point, Laguna Niguel, San Clemente — can help you spot value, understand how premium features affect appraisal, and negotiate in ways that matter locally.

Bottom Line

Falling mortgage spreads aren’t just an abstract number—they’re real dollars in someone’s pocket. For homebuyers in South Orange County, especially in coastal and premium communities, these drops can turn what felt out of reach into something real.

If you've been sitting on the fence, now might be a smart time to lean in, explore options, and see what deals you can unlock. Want help running the numbers for your own situation (price, down payment, etc.)? Happy to crunch them together.

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