Good morning from your Hometown Lender,
Rates are about the same as yesterday, and reprice risk on the day is low.
Markets were supposed to grow more worried about how the shutdown would hurt the economy, but that just doesn’t seem to be happening. There is no reason to expect anything more than nominal drifting of bonds, today or even this week. While there isn’t a big urgency to lock, I still hold a lock bias for near term and risk averse.
Here is a higher viewpoint:
🏡 Mortgage Market & Rate Update
As of October 7, 2025
📊 Current Market Snapshot
• Mortgage-backed securities (MBS): Trading slightly higher this morning, with the 30-year 5.5% coupon up about +5 basis points.
• 10-Year Treasury Yield: Holding near 4.13%, down modestly from last week’s highs.
• Mortgage Rates: Average 30-year fixed rates remain in the low 6’s, depending on credit and loan type. While the Fed has already begun cutting rates, mortgage rates have not fallen as quickly as many expected.
📰 Key Economic Data This Week
Labor Market: September’s jobs report showed only 22,000 new jobs, far below expectations, with unemployment steady at 4.3%. This signals a cooling labor market, which typically puts downward pressure on rates.
Inflation: Core PCE (the Fed’s preferred inflation gauge) rose 0.2% month-over-month, showing progress toward the Fed’s 2% target.
Consumer Confidence: Fell to 94.2, reflecting household caution amid political and economic uncertainty.
Upcoming Reports:
• Oct 8: Fed Chair Powell speaks, plus weekly jobless claims.
• Oct 9: Consumer Sentiment Index.
• Oct 10: Treasury auctions and inflation expectations data.
🏛️ Political & Policy Developments
Government Shutdown: The U.S. government remains partially shut down, with negotiations stalled over healthcare funding. If unresolved, military and federal workers could miss paychecks by mid-October. This uncertainty is keeping markets cautious.
Federal Reserve Policy: The Fed cut rates by 0.25% in September and signaled more cuts may come if the economy weakens further. Markets expect the federal funds rate to drift toward 3.6% by year-end.
Housing Outlook: Fannie Mae projects mortgage rates will gradually decline, averaging 6.4% in 2025 and dipping below 6% in 2026.
🔮 What This Means for Mortgage Rates
Short-Term (This Week): Expect rates to remain range-bound near current levels. The government shutdown has frozen some economic reporting, which limits market movement.
Medium-Term (Next Few Months): If job growth continues to slow and inflation eases, mortgage rates could begin trending lower. However, political gridlock and Treasury debt issuance may keep rates volatile.
Long-Term (2026 Outlook): With inflation expected to cool further and Fed policy easing, rates are projected to fall below 6%, improving affordability and potentially reigniting housing demand.
💡 Takeaway for Homebuyers & Homeowners
Buyers: Locking in now with the option to refinance later could be a smart strategy.
Homeowners: If you purchased at peak rates above 7%, keep an eye on the market in 2026 for potential refinance opportunities.
Investors: A cooling labor market and Fed easing cycle suggest that housing activity could pick up again in the next 12–18 months.
✅ Bottom Line: Mortgage rates are showing signs of stabilization. Economic cooling and Fed policy shifts point to gradual relief ahead, though political uncertainty (like the shutdown) may keep markets choppy in the near term.
Stay safe and make today great!