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Market Analysis 9.22.25: Rates Are Stable

Good Monday morning from your Hometown Lender,

Rates are stable to slightly worse as the market continues to digest Fed comments.

Mortgage bonds seem to have found an equilibrium for the moment, but are still at risk of drifting lower this week. Of note, rate sheets still seem to be a bit worse than bond pricing would dictate, based on comparing rate sheet pricing to mortgage bond pricing the last couple of weeks. It may give some room to see rate sheets make small improvements, even if bonds don’t.

There is no data today, and not much until later in the week.

The PCE report which is the Fed’s favorite inflation gauge, is the headliner. We will have that on Friday. We aren’t likely to see any big moves in rates, but the current bias is that we are more likely to see them creep higher than improve. Markets are currently pricing in two more Fed rate cuts this year, a quarter-point cut at each of the remaining meetings. The outlook gets fuzzier heading into 2026, with markets anticipating more cuts but not as sure of the timing.

Here’s a bit more…

🏡 Mortgage Market & Rate Outlook

Week of September 22, 2025

Mortgage rates are starting the week on steady footing, but the days ahead could bring meaningful movement. With fresh housing data, inflation signals, and political headlines in play, here’s what you need to know — and how to think about your next move.

📊 Today’s Snapshot (Monday, 9/22)

  • Mortgage-backed securities (MBS): The FNMA 30-year 5.5% coupon is trading around 101.00, slightly lower than Friday’s close. Lower MBS prices can lead to slightly higher mortgage rates.
  • 10-year Treasury yield: Holding near 4.15%, up from last week. This benchmark influences mortgage pricing and reflects investor sentiment on inflation and growth.
  • Market tone: Bonds are cautious after last week’s Fed meeting, with traders watching for confirmation of the Fed’s “wait and see” stance.

Translation: Rates are stable but sensitive. Small shifts in data or headlines could move pricing quickly.

📅 What to Watch This Week

Tuesday – New Home Sales (August) → Signals housing demand and builder confidence
Wednesday – Durable Goods Orders → A read on business investment and economic momentum
Thursday – Final Q2 GDP revision; Jobless Claims → Updated growth data and labor market health
Friday – PCE Inflation (Fed’s preferred measure) → Critical for rate direction — cooler = better for rates

📰 Political Headlines & Market Impact

  • Federal Reserve outlook: Last week, the Fed cut rates by 25 basis points and signaled a cautious path forward. Chair Powell emphasized data dependency, meaning each new report matters more than ever.
  • Government funding debate: Congress faces a looming deadline to pass a budget and avoid a shutdown. While markets expect a resolution, delays or drama could spark short-term volatility.
  • Global central banks: The Bank of Japan and Bank of England held rates steady last week, reinforcing a global “pause” narrative. This helps stabilize U.S. bond markets and mortgage spreads.

🔮 Rate Scenarios

  • Base case (sideways to slightly better): Mixed data and calm political developments keep rates in a tight range, with modest improvement possible if inflation cools.
  • Bull case (rates improve): Softer PCE inflation and weaker jobless claims could pull the 10-year yield below 4.00%, tightening mortgage pricing.
  • Bear case (rates worsen): Hot inflation or strong growth data could push yields higher, especially if political headlines add uncertainty.

💡 What This Means for You

  • Homebuyers: If you’re under contract, consider locking your rate early this week. Friday’s inflation data could swing pricing.
  • Refinancers: If your current rate is above today’s levels, now’s a good time to run a savings analysis. Even a 0.25% drop can make a big difference.
  • Investors & move-up buyers: Use scenario modeling to see how small rate shifts affect cash flow and affordability. This week’s data could open a window.

✅ Final Takeaway

Rates are stable but reactive. With inflation and growth data on deck, this week could shape the near-term rate path. The Fed is watching closely — and so should you.

Stay safe and make today great!