News and Insight

For the Weekend of September 20^th, 2025

Hawaii’s Most Read Mortgage, Real Estate, and Finance Publication for 18 Years

 

Volume 18 – Issue 3

Fed Cut – Rates Went Up?

I wrote a month ago that if you wanted to catch the drop in rates due to the Fed rate cut, don’t wait until it is announced to start your mortgage application process.  There’s a famous saying on Wall Street that says, “buy on the rumor, sell on the fact”.  That’s exactly what happened this week when the fed announced their highly anticipated quarter-point cut to the federal funds rate.  Mortgage rates went up!

 

 

Welcome to what I stare at every day.  This is a chart of the 10-Year Treasury Note.  I’ve highlighted some key data that will hopefully help you understand that waiting is never the best practice to obtaining the best rate possible.

 

On August 22^nd, the date where the big blue arrow is pointing to, was the day Fed Chairman Jerome Powel gave his annual speech to a group at the Jackson Hole Wyoming financial conference.  At that speech Powel finally acknowledged that the labor market was in trouble.  It was that date that the bond traders knew the Fed would have to cut rates at their next meeting – no doubt about it.  As you can see by the blue line, the yield on the 10-Year Note made nice progress lower.  The yield moved from a high of 4.33% all the way down to 4.03% (slightly greater than a quarter percent). That move lower was not magic.  It was the buying of bonds from bond traders anticipating the Fed announcement this past Wednesday.  For bonds, a higher yield (rate) will generate more income.  They bought in anticipation of yields dropping.

 

On September 17^th, the day the Fed announced the rate cut, the trading session ended with rates higher than the day before.  And if you look at the blue box, you’ll see that bond yields continued to climb on both Thursday and Friday.  Why?

 

There are two major reasons we are seeing this reversal.  First, it is simple profit taking.  That saying about buying on the rumor…?  The reason you sell on the fact is that once the anticipated event happens, there’s usually no more positive movement.  That’s when smart investors sell and take their profits.  The second reason for the reversal this week had nothing to do with the Fed.  The weekly unemployment report was released on Wednesday, and the numbers were not that bad.  The reason the Fed gave as to why they finally agreed to drop the fed funds rate was due to concerns over unemployment.  This latest reading showing a better employment outlook could delay further interest rate cuts.

 

Have you missed your opportunity?  Rates never go straight up or down, so no you have not.  There are so many factors that play into the actions the bond traders make – inflation, currency exchange rates, and economic projections are just a few.

 

How do you get yourself into a position to capitalize on the lowest rate possible? 

 

Step 1: Determine Your Strike Rate

Your strike rate is the rate your new mortgage must hit for the refinance to make sense.  Too many people think that rates need to drop 1% or 2% below their current rate to justify refinancing.  That is totally wrong.  The bigger the mortgage balance, the smaller the rate needs to drop for a refinance to be fiscally smart.

 

Every individual will have a different threshold of how much they’ll need to save each month.  I have had retired clients that dropped their payment by $100 per month and were thrilled because they lived on fixed income.  I have had other clients decline saving $400 per month because they didn’t want to be “bothered” with the paperwork for such an “insignificant” savings.

 

Here’s how you do the math, so you can determine your strike rate – the rate where a refinance makes sense for you.

 

• Find out your current balance and the amount you pay each month for just the principal and interest.
• Add $3,000 to that balance if your mortgage balance is below $500,000, or add $4,000 if your mortgage balance is higher.
• Use a payment calculator and play with rates using the loan amount in the last step.
• Compare the payments you get with your current P&I payment and determine the monthly difference.

 

Let’s do one together so you can see how it’s done.

 

• Lori got her mortgage last year at a rate of 6.875%. Her current balance is $435,000.  Her current P&I payment is $2,890.
• I will add $3,000 to the balance to cover closing costs. That brings the new mortgage to $438,000.

 

Here are the results:

 

 

Lori will use the information above to know what rate she wants to be at before pulling the trigger.  Everyone will look at this data differently.  Each person will have a different strike rate.  It is also very important to keep in mind that Lori may never see a 5.625% rate anytime soon.  How much longer is Lori willing to pay an extra $157 per month before pulling the trigger?  Things to ponder….

 

 

Step 2: Get your application and documentation to your lender now.

If a 6.125%-6.250% rate will do the trick for you, now is the time to get that application in.  The zero-point rates aren’t there yet, but they could be soon.  Get your file fully processed and ready to go.  A sudden dip in the market and you’ll be able to achieve your strike rate.  With your file ready to go, you could possibly get a slightly lower rate than anticipated.

 

 

 

 

And now the week’s economic news…….

 

Fed Eases

The Fed meeting on Wednesday confirmed that officials and investors share a similar outlook for a lower federal funds rate.  The most significant economic report released this week revealed that consumer spending was much stronger than expected.  Mortgage rates ended the week slightly higher but remain near the lowest levels of the year.

 

As expected, the Fed reduced the federal funds rate by 25 basis points.  There were no significant surprises in the meeting statement, which continued to emphasize the high level of uncertainty in the economic outlook due to government policy changes.  The statement noted the conflicting elements of the dual mandate of the Fed, since the labor market has weakened while inflation has risen.  During the press conference following the meeting, Chair Powell described this as "quite an unusual situation," adding to the challenge for policy makers.  Officials are placing more weight on labor market concerns, as their dot plot forecasts revealed average expectations for an additional 50 basis points in rate cuts before the end of the year, but the range of projections between officials was larger than usual.  Investors anticipate 25 basis point rate cuts at each of the two remaining meetings this year.

 

Consumer spending accounts for over two-thirds of U.S. economic activity, so the monthly Retail Sales report is a key measure of the health of the economy.  While some investors have been concerned that consumers may scale back due to economic uncertainty, it has not happened so far this year.  Retail sales in August jumped 0.6% from July, double the consensus forecast of 0.3%, and they were an impressive 5% higher than a year ago.  Particular strength was seen in motor vehicles, restaurants/bars, and apparel.

 

Lower rates were beneficial for mortgage applications again this week, according to the Mortgage Bankers Association (MBA).  Applications to refinance jumped 58% from last week and were a massive 70% higher than one year ago.  The average loan size for refinances rose to a record high.  The share of adjustable-rate mortgages (ARM) for refinances climbed to 12.9% of total applications, the highest level since 2008.  Purchase applications increased 3% from the prior week and were up 20% from last year at this time.

 

 

 

Next Week

Looking ahead, investors will continue to watch for additional information about tariffs and monitor comments from Fed officials for hints about monetary policy later in the year.  For economic reports, New Home Sales will be released on Wednesday and Existing Home Sales on Thursday.  Personal Income and the PCE price index, the inflation indicator favored by the Fed, will be released on Friday.

 

 

Until next week….

 

*** Please note that Freddie Mac publishes their weekly rate report on Wednesday mornings from data received Monday and Tuesday. 

The graph above is intended to shown rate trends, and not “today’s current rate”. ***

 

 

Reviews From Our Past Clients

With every client, we promise to provide you with a comprehensive analysis of your mortgage needs, the best service possible, and the best rates we can find.  We make it our mission to have every transaction close with our clients happy with the service we provided.  Browse through the hundreds of reviews we’ve received from our clients posted on both Google and Zillow.com, and read what they thought of their experience using Hawaii Mortgage Company.

 

 

Google Link:

Hawaii Mortgage Company Review on Google.com

 

 

Zillow.com Link:

Hawaii Mortgage Company Reviews on Zillow.com

 

 

 

Our Rate Quote System is Available to You

Our automated rate quoting system is live.  Now you can check rates and try different scenarios 24-hours a day.  Remember, it’s just a computer.  For non-standard rate quotes, such as construction, vacant land, and other specialty programs, you’ll still need to give a call.

 

Here’s the link:      https://www.hawaiimortgage.net/todays-rates/

 

 

Do you think all lenders are the same?

There is a difference when you use Hawaii Mortgage Company for your financing.  Here’s a short video telling you why:

 

https://youtu.be/c7AKQ5wa2_U

 

 

 

Broker vs. Banker?

Click the link below to get a quick lesson on why working with a Mortgage Broker will benefit you on your next transaction.

 

https://youtu.be/iH3igW5v2jE