10/27/25 REcap: The Big Pitch For Lower Mortgage Rates

Our LendFriend Learning Center has now has over 180 articles to help homebuyers buy with confidence. Check out top articles of the week at the bottom of this email.

Inflation Comes in Softer Than Expected

September’s inflation data brought a welcome surprise for markets. The Consumer Price Index rose just 0.2% from August, with core inflation — which excludes food and energy — also up 0.2%, both below forecasts. On a yearly basis, inflation held steady at 3%, signaling that price pressures continue to ease even amid tariff-related costs and solid consumer spending. The report showed notable relief in housing and airfare costs, marking the slowest pace of rent increases since early 2021. While grocery and apparel prices crept higher, the overall trend points to moderating inflation across much of the economy.

For the Federal Reserve, this report couldn’t have come at a better time. With inflation now running cooler than expected and the labor market showing signs of softening, the Fed remains on track for a quarter-point rate cut at next week’s meeting — and possibly another in December. Investors are betting this could mark the start of a more sustained easing cycle (not like the short lived cycle we saw at the end of 2024), especially if the next jobs report confirms further cooling. For mortgage borrowers, it’s one more step toward the rate relief that’s been building since Powell first hinted at cuts in late summer.

Trade Talks Over The Weekend Ease Global Tensions

Over the weekend, U.S., China, and Brazil trade negotiators struck a surprisingly cooperative tone, signaling progress toward a broader agreement that could ease global inflation pressures. U.S. Treasury Secretary, Scott Bessent, said a preliminary U.S.–China framework produced during discussions in Malaysia effectively takes Trump’s threat of 100% tariffs “off the table”.

Meanwhile, separate discussions with Brazil were similarly productive. Brazil’s President Luiz Inacio Lula da Silvasaid he had a “surprisingly good” meeting with Trump and predicted a “definitive solution” over bilateral disputes within days.

For mortgage borrowers, this can lead to some great results. Trade peace tends to lower import costs, calm energy markets, and reduce inflation expectations — all factors that influence long-term Treasury yields and mortgage-backed securities. If meeting between the bosses (Trump and Xi) goes well and trade agreements are actually signed, it could further support the Fed’s path toward lower rates even more and give homebuyers additional relief heading into year-end.

Community Lenders Pitch Plan to Lower Mortgage Rates

Community banking and lender groups are urging the Trump administration to let Fannie Mae and Freddie Mac (the GSEs) temporarily buy up to $300 billion in mortgage-backed securities (MBS) to help bring mortgage rates down.

In a letter to Treasury Secretary Scott Bessent and FHFA Director Bill Pulte, the Community Home Lenders of America and the Independent Community Bankers of America proposed amending the Preferred Stock Purchase Agreements to allow the GSEs to purchase their own and Ginnie Mae MBS whenever the spread between the 30-year mortgage rate and the 10-year Treasury exceeds 170 basis points. With the current spread at 222 bps and investor demand for MBS historically weak, the groups argue this move could trim mortgage rates by roughly 30 bps without reviving the “unlimited” buying power the GSEs had before the 2008 crisis.

What does that mean for mortgage rates? If adopted (and that's a BIG if) , the plan could meaningfully lower borrowing costs for homebuyers. Every 25-basis-point reduction in the MBS-Treasury spread would cut mortgage rates by 0.25%, so a 52-bps compression would translate to a more than 0.5% drop in rates. The proposal is only a suggestion for now, and who knows if the Treasury Department would agree to reduce rates by that much by buying MBS bonds. Still, with affordability strained and spreads unusually wide, it’s an idea the Treasury Department could seriously consider—especially as the Fed’s quantitative tightening winds down and policymakers look for new ways to support housing demand.

Looking Ahead: The Fed Meeting This Wednesday

Nearly everyone believes that the Fed will cut the Fed Funds Rate by 25bps but don't expect rates to fall this week unless something UNexpected happens. Remember, the expected move is already priced into mortgage rates today. If Powell takes the mic on Wednesday at 2:30pm ET and says. "we're ready to cut rates 5 more times", mortgage rates will fall, but if he says "we're going to continue to look at the data and no future rate cut is guaranteed" mortgage rates may go up slightly. I'll be listening to every word. If you have any questions following the Fed's announcement you can always text, call or email!