Can government job cuts lead to lower mortgage rates for spring?

Didier Malagies • February 24, 2025


Could the loss of jobs in the government sector and the withdrawal of funding from the economy significantly increase the unemployment rate and a surge in jobless claims? If this happens, will we see lower mortgage rates this spring?


It’s an intriguing thought, especially considering how this aligns with White House officials’ strategy to boost labor supply, reduce aggregate demand, and potentially drive down the 10-year yield.


I have been delving into this topic for a while now and I took another deep dive in this recent episode of the HousingWire Daily podcast. The government’s actions impact the livelihoods of many Americans — not just through layoffs of federal workers but also by cutting funding that will result in more jobs being lost. It feels like a broader game plan is at play here, worth exploring as we navigate these economic changes together.

10-year yield and mortgage rates 


In my 2025 forecast, I anticipate the following ranges:

Mortgage rates will be between 5.75% and 7.25%

The 10-year yield will fluctuate between 3.80% and 4.70%


So far in 2025, we have consistently been near the upper end of the year’s forecast. However, last week saw a decline in mortgage rates due to softer economic data, which led to an influx of money into the bond market as stocks sold off on Friday. Since 2022, whenever mortgage rates have approached 6% it’s because the bond market is concerned about the economy slowing down.


Currently, with the economic data available, the 10-year yield and Fed policy align reasonably well. However, the bond market may be concerned that if the unemployment rate rises, particularly with jobless claims increasing due to government layoffs and more negative impacts from less money circulating in the economy, we could see more money flowing into bonds, sending yields and mortgage rates lower.


We need to be more mindful of the labor data as we go further into 2025. Each year, millions of people are fired from the private sector. However, if we focus on government workers and government contractors, it’s likely that the unemployment rate will rise in 2025. This increase could challenge the Federal Reserve‘s target limit of 4.3%.



The White House is looking for a lower 10-year yield and the bond market has in the past gotten ahead of the Fed when it smells an economic growth scare, this has meant the 10-year yield and mortgage rates go lower. As you can see in the chart below, we are 36 basis points lower than the peak of what we saw on Jan. 14.



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