Here's an interesting angle on mortgage rate optimization that deserves more attention:

The U.S. conventional mortgage market has a distinct structural feature—borrowers can prepay loans anytime without penalty. This flexibility is a double-edged sword.

On the surface, prepayment optionality sounds borrower-friendly. But here's the catch: lenders bake the cost of this option into mortgage rates and spreads, making the borrowing cost higher across the board. When you think about it, this embedded option premium gets passed down to everyone in the market.

What if we recalibrated how this works? By adjusting the prepayment mechanics or creating alternative mortgage products with different risk-return profiles, you could theoretically compress spreads and bring down effective rates for borrowers.

It's worth exploring whether restructuring this market feature could create meaningful relief on mortgage costs—especially in a rising rate environment where affordability matters.