This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.
Market Commentary:
The Federal Reserve cut its benchmark interest rate by 0.25 percentage points on October 29, 2025, lowering it to a range of3.75% to 4%. This marks the second rate cut this year. The Fed reduced the federal funds rate by 25 basis points, from 4.00%–4.25% to 3.75%–4.00%. The move aims to support the weakening labor market while inflation remains above the Fed’s 2% target. A similar 0.25% cut occurred in September 2025, the first since December 2024.
Commentary from MBS Live after the Fed Rate Cut Announcement - Wed, Oct 292025, 4:02 PM:
Today was not a foregone conclusion and there was no way to know ahead of time that it would end like this, but the outcome is exactly why we've gone to such lengths to warn about the potentially paradoxical reaction to a Fed rate cut.
Too many people repeat the fallacy that mortgage rates will benefit from a Fed cut. We have several recent examples of the exact opposite happening, and now today adds another strong reminder with the average lender moving higher at the fastest pace since the day after the last Fed meeting.
It has nothing to do with the rate cut itself. As we warned, volatility would come from Fed Chair Powell's press conference. In today's case, Powell said that another rate cut in December was not a foregone conclusion. This was at odds with the market's expectations, so there was a rush to reprice those expectations.
As always, today's rates instantly adjust to expectations for rates in the future (the main reason that Fed rate cuts do little-to-nothing to impact market rates). In relative terms, rates are still lower than most of the past year, but back up to similar levels seen on October 14/15th.
MBA Forecast: Total Single-Family Mortgage Originations to Increase 8% to $2.2 Trillion in 2026
Fed Watch: Target rate (in bps) possibilities, according to the CMEGroup (as of 10/30/2025 – 12:00 PM EST):
To the surprise of nobody, the Fed cut rates by 25bps. The surprise was it was hawkish cut. The phrases “not a forgone conclusion” and “in fact far from it” are key. Moreover, there was one dissent in favor of no cut. With recent inflation data being problematic but no employment data available, a December rate cut is now more precarious and will likely require a weak November employment report. - Elliot F. Eisenberg - Economist
News You Can Use:
· States Where Mortgage Interest Rates Are Decreasing the Most
· The Fed Cuts amid Partly Cloudy Conditions – Eye On Housing
· Fed rate decision October 2025: Rates cut again, but Powell raises doubts about December
· Home price gains lag inflation, meaning homeowners lose out on investment
· As Fed Weighs Rate Cut, Layoffs Mount at Amazon, UPS, Target
· CPI inflation September 2025: Inflation rate hit 3%, lower than expected
· Federal shutdown could cost US economy up to $14 billion | Reuters
*Communication is intended for Industry Professionals only and not intended for Consumer Distribution
Interest rate and annual percentage rate (APR) are based on current market conditions as of 10/30/2025, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Estimated closing costs used in the APR calculation are assumed to be paid by the borrower at closing. If the closing costs are financed, the loan, APR and payment amounts will be higher. Contact us for details. Additional loan programs may be available. Accuracy is not guaranteed, and all products may not be available in all borrower's geographical areas and are based on their individual situation. This is not a credit decision or a commitment to lend. actual interest rate, APR, and payment may vary based on the specific terms of the loan selected, verification of information, your credit history, the location and type of property, and other factors as determined by Prosperity Home Mortgage, LLC. Not available in all states. Rate is as of 10/30/2025 and is subject to change at any time without notice. Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac’s economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac’s business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current, or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution.
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