Weekly Mortgage Rate Update-10-22-2025
Don’t Stop Believing
Hold on to that feeling - mortgage rates have been edging slowly lower over the past two weeks as the government shutdown continues to drag on. Every day adds to the uncertainty as more employees and services are impacted. Today is day 22, making this the 2nd longest shutdown in history. Shutdowns slow economic growth. According to the BEA, federal spending makes up 23% of U.S. GDP, and furloughed workers are spending less which will show up in future economic reports.
Speaking of reports, we aren’t getting much news on the economy lately due to the shutdown, so rates are being driven by the uncertainty of the moment. Some of the improvements could fade once the shutdown ends and that uncertainty factor is removed.
Supply vs. Demand
Last week, Powell announced the Fed will soon stop balance sheet reductions. The balance sheet is the bonds that they hold on their books. When the Fed purchases bonds (quantitative easing) it reduces the supply and boosts demand, this moves rates lower. Since 2022, they’ve flipped to quantitative tightening, letting bonds mature without reinvesting and not purchasing new bonds which floods the market with supply and pushes rates up. This activity by the Fed moves mortgage rates more than the Fed funds rate. Ending it means less supply of bonds hitting the market—good news for our rate outlook.
Speaking of supply- more good news. The CBO just released their 2025 fiscal budget deficit, and it shows a deficit of 1.78 trillion for the fiscal year, still too high, but 2.2% lower than 2024. The improvement is due to increased tariff revenues. Lower deficit spending will help mortgage rates because less supply will need to be absorbed in the market.
What’s Ahead
Besides any developments on the government shutdown, we have CPI inflation on Friday. This is our first government report in weeks so it will be closely watched for the inflation outlook.
On the technical side, the momentum for lower rates looks promising for now. After all the good news the future bond supply, the 10-year Note has broken a key resistance level lower below 4% and held for the past few trading days, this is a hard level to break and is helping mortgage rates move lower.
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