Mortgage rates retreated slightly Thursday but remained within the same narrow range where they’ve been since September, as markets hit the pause button amid the ongoing political standoff between Republicans and Democrats over the government shutdown.
The average rate on 30-year fixed home loans edged down to 6.30% for the week ending Oct. 9, down from 6.34% the week before, according to Freddie Mac. Rates averaged 6.32% during the same period in 2024.
“Mortgage rates decreased this week,” says Sam Khater, Freddie Mac’s chief economist. “Over the last few weeks, mortgage rates have settled in at their lowest level in about a year. There is growing evidence that homebuyers are digesting these lower rates and gradually are willing to move forward with buying a home, which is boosting purchase activity.”
The timing of the shutdown is particularly consequential for housing and monetary policy, with the Federal Reserve’s next Federal Open Market Committee (FOMC) meeting scheduled for Oct. 28-29.
While the central bank has not been directly impacted by the impasse in Washington, D.C., thanks to its independent funding, key economic data inputs the Fed relies on to make policy decisions concerning interest rates—such unemployment, inflation, and retail sales report—will be delayed if the disruption continues.
The September jobs report, originally slated for release last Friday, could not be published because U.S. Bureau of Labor Statistics staff have been furloughed.
“This could complicate the Fed’s ability to assess incoming trends and delay clear signals on future rate moves,” says Realtor.com® senior economist Anthony Smith.
At its most recent meeting in September, FOMC voted to cut the federal funds rate by a quarter of a percentage point, its first reduction in nine months, based on recent economic data reflecting elevated inflation and a softening labor market.
According to newly released minutes from that FOMC meeting, Fed policymakers discussed the risk of a “substantial deterioration” in the housing market.
Smith says that for prospective homebuyers the current holding pattern in mortgage rates offers stability, but broader uncertainty associated with the shutdown may drive down consumer sentiment, making major purchases, like a home, less likely.
Federal workers and contractors in affected metros, led by Washington, may see housing plans postponed, and mortgage processing may be slowed for loans requiring federal verification or flood insurance tied to the National Flood Insurance Program, which has lapsed since the start of the shutdown.
“Importantly, this period of relative calm in mortgage rates is unfolding just as we approach what Realtor.com has identified as the Best Time To Buy in the housing market,” notes Smith.
Historically, mid-October offers the best combination of pricing, inventory, and reduced competition for buyers.
“If the shutdown is resolved quickly and broader conditions remain stable, this fall could bring a rare combination of opportunity and breathing room for motivated home shoppers,” says the economist.
How mortgage rates are calculated
Mortgage rates are determined by a delicate calculus that factors in the state of the economy and an individual’s financial health. They are most closely linked to the 10-year Treasury bond yield, which reflects broader market trends, like economic growth and inflation expectations. Lenders reference this benchmark before adding their own margin to cover operational costs, risks, and profit.
When the economy flashes warning signs of rising inflation, Treasury yields typically increase, prompting mortgage rates to go up. Conversely, signs of falling inflation or weakness in the labor market usually send Treasury yields lower, causing mortgage rates to fall.
The mortgage rates you’re offered by a lender, however, go beyond these benchmarks and take some of your personal factors into account.
Your lender will closely scrutinize your financial health—including your credit score, loan amount, property type, size of down payment, and loan term—to determine your risk. Those with stronger financial profiles are deemed as lower risk and typically receive lower rates, while borrowers perceived as higher risk get higher rates.
How your credit score affects your mortgage
Your credit score plays a role when you apply for a mortgage. A credit score will determine whether you qualify for a mortgage and the interest rate you’ll receive. The higher the credit score, the lower the interest rate you’ll qualify for.
The credit score you need will vary depending on the type of loan. A score of 620 is a “fair” rating. However, people applying for a Federal Housing Administration loan might be able to get approved with a credit score of 500, which is considered a low score.
Homebuyers with credit scores of 740 or higher are typically considered to be in very good standing and can usually qualify for better rates.
Different types of mortgage loan programs have their own minimum credit score requirements. Some lenders have stricter criteria when evaluating whether to approve a loan. They want to make sure you’re able to pay back the loan.
