What was long thought impossible might now be probable; mortgage rates in the 5s in 2025.
I’ve actually been expecting it, and penciled a 5.875% 30-year fixed for the fourth quarter nearly a year ago in my annual mortgage rate predictions post.
So it’s not a big surprise to me, but many folks out there couldn’t even fathom a rate in the low-6s this year, let alone the 5s.
Now with labor appearing to crack badly and a government shutdown underway, the thought of much lower mortgage rates doesn’t seem so far-fetched.
But it will depend on the duration and severity of the shutdown, along with the economic data that is released, perhaps only via private channels.
More Weak Jobs Data and a Government Shutdown Push Mortgage Rates Lower
Today was a bit of a double-whammy for the economy, with both a weak jobs report delivered and the start of a government shutdown.
Let’s start with the shutdown. It’s the first government shutdown since 2019, which also took place under the Trump administration.
That also happened to be the longest government shutdown in U.S. history, a full 35 days, from late 2018 to early 2019.
Given the current state of things, it would not shock me for this shutdown to last even longer, though it could equally end at any given moment.
It’s just that we seem to be living in a much more contentious time than 2018/2019, with much more division among parties.
So it’s not hard to envision this impasse going on for an extended period of time and causing some serious disruptions.
As I wrote a couple years ago, government shutdowns tend to be accompanied by bond rallies.
That is to say that investors seek the safety of bonds, thereby pushing their associated yields lower.
The 10-year bond yield in particular has fallen an average of 59 basis points (0.59%) during shutdowns dating back to 1976.
If yields do happen to fall by that amount, it would put the 30-year fixed at around 5.75%, assuming spreads stay constant.
But again, it depends how severe the shutdown is and how long it persists. And also what else happens in the wider economy during that time.
ADP Jobs Report Comes in Negative as New Government Data Placed on Hold
Speaking of what happens in the economy, jobs data came out this morning from the private sector and it wasn’t pretty.
The September 2025 ADP National Employment Report revealed that the private sector lost 32,000 jobs, well below the forecast of 45,000 jobs created.
In addition, the number of jobs created in August 2025 was revised down from 54,000 to -3,000 (yes, negative).
The ADP data is basically mirroring what we’ve been seeing in the public sector with the BLS jobs report, which has been very weak the past couple months.
However, assuming the shutdown isn’t resolved this week, we won’t get the government jobs report for September.
Given ADP seems to be showing more of the same though, it wouldn’t shock me if the government jobs report is also bad again whenever it comes.
So it might not matter much if it’s delayed. Bond yields could continue to trickle lower as the shutdown persists.
How Mortgages Will Be Impacted by a Shutdown
One last thing. If this shutdown goes on for a while, and mortgage rates fall as expected, it might create a weird dynamic.
We could see a little refinance boom (and uptick in home buying) at a time when mortgage staffing is light, notably at the FHA and USDA.
For example, the FHA already said it won’t endorse HECM loans (reverse mortgages) or Title I loans, which include loans on manufactured homes and home renovation projects.
In addition, they won’t approve condo complexes for FHA financing via their most commonly used HRAP system.
When it comes to USDA loans, the whole system kind of shuts down and you basically can’t move forward with a new loan or a loan in progress.
However, VA loans and conventional loans, such as conforming loans backed by Fannie Mae and Freddie Mac, can continue albeit with possible delays related to the IRS or National Flood Insurance Program (NFIP).
So while mortgage rates might improve because of all this, it could create even more chaos if mortgage lenders get inundated with new loan applications.
This is partially why I argued that we might be better off without a shutdown and more economic data released.
Read on: How the Government Shutdown Affects Mortgage Lending
