Mortgage Rates Headed Lower—Unless Washington Gets in the Way

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News Flash

Fed Signals More Cuts Ahead

Markets are betting on another Fed rate cut in October, with experts predicting mortgage rates could slip into the high-5% range by year's end.

Federal Reserve Bank of Boston President Susan Collins recently hinted at more rate cuts, saying it "may be appropriate to ease the policy rate a bit further this year" if inflation continues cooling and employment stays stable.

Here's what that means for buyers: A $300,000 mortgage at today's 6.13% rate costs about $1,824 monthly. Drop that rate to the high-5% range, and monthly payments fall substantially.

The mortgage industry is watching closely. If inflation keeps trending down and labor markets hold steady, expect more rate reductions through year-end — creating what could be the best refinancing window since 2022.

Government Shutdown Could Slam the Brakes on Housing Market

While rate cuts look promising, there's a wrench heading for the works: a potential government shutdown starting October 1.

FHA and VA loans — representing up to 33% of mortgage applications — face serious delays if federal workers get furloughed. The bottleneck? IRS tax return verifications and income confirmations that require those same furloughed employees.

But here's the real kicker: The National Flood Insurance Program expires October 1 without congressional action.

New flood insurance policies would halt immediately. That means buyers in flood-prone areas either find expensive private alternatives or deals fall through. Mortgage lenders typically require flood coverage, making this a transaction-killer for thousands of properties.

The Fed's rate-cutting plans could also shift if shutdown-related market volatility emerges. Previous shutdowns were manageable, but this one combines mortgage processing delays with flood insurance disruption — a double hit the housing market hasn't seen before.

October's shaping up to be quite the month.

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More You Should Know

• Housing Permits Hit Lowest Since 2020: In August 2025, U.S. housing construction permits fell to their lowest level since May 2020, impacting both single-family and multifamily sectors across most regions due to persistent challenges like high material costs, labor shortages, and elevated borrowing costs. [Source]

• CRE Faces Persistent Financing Hurdles: Commercial real estate financing continues to face significant headwinds in 2025 due to elevated debt costs, stricter lending standards, and policy uncertainty, leading to a sluggish market recovery and concerns over upcoming loan maturities among property owners. [Source]

• Property Insurance Costs Soar: Property insurance now constitutes a record 9.6% of average monthly mortgage expenses, having surged 70% over the last five years, thereby significantly diminishing housing affordability, especially in high-risk areas like California. [Source]

• Real Estate Fraud On Rise: Real estate fraud losses climbed $28 million with a 6.1% rise in the National Mortgage Application Fraud Risk Index in 2025, leading the title industry to introduce new fraud prevention measures like enhanced identity verification and endorsements to counter sophisticated scams. [Source]

• Pending Home Sales Unexpectedly Decline Despite Lower Mortgage Rates: Despite nine weeks of falling mortgage rates, pending home sales fell 1% in the four weeks ending September 21. High prices, buyer hesitation for rates under 6%, low inventory and broader economic uncertainty all contribute. [Source]

• Low Rates Freeze Housing: Homeowners are hesitant to sell due to significantly lower existing mortgage rates compared to current market rates, which continues to constrain housing supply and maintain upward pressure on prices. [Source]

• Compass Acquires Anywhere Real Estate: Real estate giant Compass acquired rival Anywhere Real Estate for $1.6 billion, consolidating the residential brokerage industry and expanding its service offerings to include title and settlement services. [Source]

• AI Accelerates Real Estate Evolution: The real estate sector is experiencing rapid transformation with artificial intelligence driving market growth and reshaping property valuations, market analysis, and customer service, signaling a significant shift in industry operations. [Source]

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