Oct 26 (Reuters) - Real estate investment trust UDR cut its full-year funds from operations (FFO) forecast on Thursday, as it expects demand to soften owing to higher housing costs and mortgage rates.

Higher inflation and higher interest rates have led to a cooling demand across the housing market.

"Recent operating trends across the industry have been softer than typical due to all-time high levels of new supply," said Chief Executive Officer Tom Toomey.

UDR now expects full-year FFO to be in the range of $2.45 to $2.47 per share, compared with its prior estimate of $2.48 to $2.52.

The Highlands Ranch Colorado-based REIT, which operates multifamily apartment communities in the United States, reported FFO of 61 cents per share for the quarter ending Sept. 30, compared with 57 cents per share a year earlier.

Total revenue for the third quarter increased by 4.8% from a year earlier to $410.1 million.

(Reporting by Amna Karimi and Aatreyee Dasgupta in Bengaluru)