US Mortgage Rates Fall for the First Time in Three Weeks

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The average rate on 30-year fixed mortgages in the United States slipped from 6.34% to 6.3% as of October 5, 2025—the first decline in three weeks, Bloomberg
reports, citing Freddie Mac data. The drop is modest, but analysts believe it could mark the start of stabilization after the market’s volatile summer.

The Federal Reserve has [leech=https://www.reuters.com/business/us-30-year-fixed-mortgage-rate-falls-prospective-buyers-stay-sidelines-2025-10-09]resumed cutting** its policy rate amid a cooling labor market, where layoffs remain low but labor demand has weakened. Mortgage costs are still roughly double their pandemic-era levels but are notably below mid-2025 peaks, slightly improving affordability for would-be buyers. Even so, new purchase applications have not risen: many households remain sidelined by elevated home prices and uncertainty about the economic outlook. Some homeowners used the dip to refinance existing loans.



Sentiment is being further dampened by the ongoing federal government shutdown. Since October 1, operations have been paused because Congress failed to pass a funding bill for the new fiscal year. According to the National Conference of State Legislatures (NCSL), about 750,000 federal workers have been [leech=https://www.ncsl.org/in-dc/federal-government-shutdown-what-it-means-for-states-and-programs]furloughed
without pay**, and most agencies have halted activity.

Citing the US Treasury, Reuters [leech=https://www.reuters.com/world/us/us-treasury-chief-says-government-shutdown-is-hitting-economy-2025-10-13]reports** that the shutdown is already affecting the economy: resources are being redirected to priority payments while other agencies face delays. Essential services—defense, health care, and national security—continue in a limited capacity. House Speaker Mike Johnson [leech=https://apnews.com/article/b6b59cae2ec28b39e57fbb703704f46a]warned** the standoff could become the longest shutdown in history if Congress fails to reach a deal in the coming weeks.



A Redfin survey shows about 17% of Americans have postponed major purchases, including homes and cars. Chief economist Daryl Fairweather said the shutdown undermines consumer confidence: “It not only deprives some workers of pay but also shakes financial stability. People feel they’ve already endured inflation, rate hikes, job losses, a volatile stock market—and now a government halt. They don’t know what comes next.”

Buyer conditions remain challenging. Home prices have barely eased and listings remain scarce. Most existing homeowners hold mortgages below 6% and are reluctant to sell, knowing a new loan would be costlier. This is constraining the resale market and delaying a sustained demand recovery. In the four weeks ending October 5, completed sales fell 1.3% year-over-year—the sharpest decline in five months. The median time to sell a typical home reached 48 days, a week longer than a year ago and the longest since September 2019.



Experts polled by Reuters [leech=https://www.reuters.com/markets/us/us-housing-market-remain-stuck-rut-high-rates-choke-demand-2025-09-16]expect** the US housing market to remain stuck in stagnation at least through late next year: elevated mortgage rates continue to choke demand, and a notable recovery may not arrive before 2027. Weak buyer demand has already prompted price declines: the S&P CoreLogic Case-Shiller 20-city index has fallen four straight months, the first such run since February 2023. Forecasts now see US home prices rising just 2.1% in 2025 and 1.3% in 2026—well below June projections (both 3.5%). By 2027, growth may return to around 3%.

The Fed will likely continue easing policy, but mortgage rates also track long-term Treasury yields, which remain high. Consensus sees the average 30-year fixed at 6.37% in 2026 and 6.2% in 2027—well above the pre-pandemic ~4%. Existing-home sales—over 90% of transactions—are expected to hover near 4 million annually (vs. 6.6 million at the start of 2021), highlighting the scale of demand destruction.

James Knightley, chief international economist at ING, warns of mounting risks. With labor markets weakening, demand will likely stay soft; if unemployment rises, forced sellers may emerge. He allows for further price declines over the next 6–12 months, while noting that for many young Americans, homeownership remains out of reach.



The expected rate relief will offer only modest help: it may slightly improve mortgage affordability but won’t change the overall picture. By most estimates, US housing will remain in a state of “cautious equilibrium”—caught between high borrowing costs and weak buyer interest—for quite some time.