Mortgage rates hold steady as shutdown enters seventh day

"Government shutdowns can influence mortgage rates through investor perceptions of the economy. Their moves impact the 10-year Treasury market, which is historically correlated with 30-year mortgage rates due to their long-term horizon. The shutdown can also complicate access to official data, including reports the Federal Reserve uses to guide its decisions on the benchmark interest rate. Last week was jobs week, but with the government shutdown, we didn't have the final job reports for the week, which included jobless claims on Thursday"

"Mohtashami, who projects mortgage rates between 5.75% and 7.25% in 2025, said that spreads between mortgage rates and the 10-year Treasury yield have been the best story for rates this year. At one point this year, we were just 0.35% away from normal spread levels, and we reached 0.2% away from my peak improvement forecast for 2025 for mortgage spreads, Mohtashami added."

"Realtor.com senior economist Jiayi Xu said in a statement that the timing of the shutdown is particularly sensitive since it came after the Fed cut rates for the first time in nine months. On Sept. 17, the Fed lowered its benchmark interest rate by 25 bps, setting the target range at 4% to 4.25%. The Fed is now awaiting critical economic data such as employment reports and inflation figures to guide its next steps, but these releases are highly likely to be delayed."

Government shutdowns can shift investor demand toward Treasury securities, affecting the 10-year Treasury market that correlates with 30-year mortgage rates. Shutdowns can restrict access to official economic releases, including jobless claims and the Bureau of Labor Statistics jobs report, which the Federal Reserve monitors for policy decisions. The 10-year yield recently ended the week at 4.12%. Improvements in spreads between mortgage rates and the 10-year Treasury have supported lower mortgage costs, with projected 2025 mortgage rates between 5.75% and 7.25%. Investors often flock to Treasuries during shutdowns, potentially lowering yields and reducing mortgage rates by roughly 0.125 to 0.25 percentage points, though other market forces can offset those effects. The Fed cut its benchmark rate by 25 basis points to a 4.00%–4.25% range and is awaiting delayed employment and inflation data to guide future actions.

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