Are You Smarter Than a Hedge Fund Manager?

I don’t know many large-scale investment professionals, and I certainly don’t get many calling for a rate quote.  If you want to win by obtaining the best rate for a potential refinance, you need to change your thinking.  If you think calling for rates the day the Fed announces a rate cut is a great strategy – you are very wrong.  Today I’ll try and explain why.

 

Just about everyone knew the Fed was going to lower interest rates on Wednesday, just like the situation six weeks ago when the Fed had their first rate cut in almost a year.  Prior to that September rate cut, I urged those wishing to take advantage of the recent drop in rates to NOT wait until the Fed announced their cut.

 

The chart below is the rate offered for the US 10-Year Treasury Note.  It is the easiest chart to demonstrate mortgage rate movement.  While mortgage rates are pegged to bonds called Mortgage-Backed Securities, or MBS, they generally move in lockstep with the 10-Year Note.  The blue arrows indicate the days of the Fed meetings where the rate cut was announced.

 

 

As you can see, reading from left of the first blue arrow, the 10-Year Note dropped from a high of almost 4.40% to a low of 4.03%.  Then the Fed announced their rate cut, and rates moved up to almost 4.20% in just 14 days.  Why did mortgage rates go up after the Fed cut rates?  I don’t want to repeat myself.  For those that missed last month’s explanation here is a link to that very detailed article:

 

9/20/2025 Newsletter

 

I also provided greater insight into how to navigate mortgage rate cycles in an August newsletter.  Here’s the link to that piece:

 

8/16/2025 Newsletter

 

 

The same situation happened again this week when the Fed announced another rate cut.  On September 28^th, the 10-Year Note was 4.20%.  By October 24^th the rate had dropped to 3.95%.  On Wednesday while I was watching the bond market sell-off and seeing rates climb again, I was inundated with calls from people thinking the time to pull the trigger on a refinance is the day the Fed announces their plans.  A famous quote on Wall Street is: “Buy on a rumor, sell on the fact…”  For mortgages, that saying holds true.  The guys on Wall Street have really smart people working for them with lots of research at their disposal.  Sometimes they get it wrong, but more times than not, they get it right.  Do you think you can navigate financial markets better than they can?  Rates started falling in September once the big investors on Wall Street were certain the Fed would announce a cut at their October 29^th meeting – not the day of the announcement.  It always works that way.

 

Part of the market reversal on Wednesday that took everyone by surprise came from the lips of Fed Chair Jerome Powell himself.  Investors prior to the Fed announcement were driving rates lower not only because of the 25-point reduction the Fed was going to announce, but they were banking on an additional 25-point cut at their next meeting in December.  At the press conference after the Fed announcement, Fed Chair Powell gave a flippant answer to a question putting the December rate cut in question.  “Buy on a rumor, sell on the fact…”  And that’s what happened.  The 10-Year Note ended trading on Friday at 4.09%.

 

We all hope and pray for rates to move lower, but no one truly knows for sure.  That is why you need to establish a strategy.  I encourage you to re-read my 9/20/2025 newsletter on determining a strike rate.  The link is above.  A strike rate is the target rate you need to achieve to make a refinance financially appropriate.

 

 

 

 

Halloween – A Sign of Our Future?

How was the crowd coming to your door this “all hallows eve”?  I live in East Oahu, and my neighborhood is dead – not a single trick-or-treater.  It has been on the decline for almost a decade.  COVID killed the crowds I used to get, for good.  I know many shopping centers looking to generate traffic now encourage parents to bring their kids to the mall instead.  But getting candy from a merchant is not the same as your neighbors seeing your kids dressed up in costume.  It was one of the things that created bonds with our neighbors.

 

In many cases, parenting neighbors would get together and “socialize with an adult beverage” in a centrally located garage passing out candy as all the kids went as a group throughout the neighborhood.  We as a society generally no longer know our neighbors.  That’s why it is easier to take the kids somewhere else to trick-or-treat.

 

I hope that we can bring back some sense of community.  The first step is to get to know your neighbors.  Maybe start with a note in the mailbox wishing to introduce yourself.  If you don’t know what to say, start with “since we live next to each other, it would be nice to meet!”  Or drop them off some fruit that grows in your yard.  However you want to start, let’s try and be a community again.

 

BTW, thank you for all the nice comments about last week’s masthead photo of the pineapple jack-o-lanterns.  I couldn’t make Halloween complete without this week’s addition of my cat Felix wishing to pose with his new friends.  It made me think of that Sesame Street song about “some of these things belong together…”

 

 

 

 

And now the week’s economic news…….

 

Fed Meeting

With the lack of major economic data due to the government shutdown, investors turned their attention to other areas, particularly the Fed meeting on Wednesday.  While the Fed made the anticipated rate cut, comments from Chair Powell were negative for mortgage markets.  The US and China reached a trade deal for a year which avoided a threatened increase in tariffs, but it caused little reaction.  As a result, mortgage rates ended the week a bit higher, up from their lowest levels of the year.

 

As expected, the Fed reduced the federal funds rate by 25 basis points to a range of 3.75% to 4.00%.  There were no significant surprises in the meeting statement, which noted the high level of uncertainty in the economic outlook due to government policy changes and the lack of economic data during the shutdown.  The big news came during the press conference after the meeting.  Investors had been pricing in a roughly 90% chance of an additional 25 basis point rate reduction at the next meeting in December, so they were caught completely off guard when Fed Chair Powell said that another rate cut is far from a sure thing, with "strongly differing views" among officials about how to proceed.

 

 

 

 

 

 

 

 

 

 

 

 

 

While it was widely anticipated, another policy change also was notable.  The Fed maintains an enormous portfolio of bonds so that banks will have access to liquidity to help the economy run smoothly.  To boost the economy during the pandemic, the Fed more than doubled its holdings of Treasuries and mortgage-backed securities.  Since 2022, it has been gradually returning to more normal levels by letting maturing securities roll off its balance sheet without replacing them.  According to Powell, the current portfolio of roughly $6.6 trillion is likely the appropriate size based on economic conditions.  As a result, the Fed will resume purchasing bonds to replace maturing ones, although the mix of securities may shift over time.

 

The latest confidence survey published by the Conference Board revealed that consumers are concerned about the impact of higher tariffs and the government shutdown.  In October, the index dropped to the lowest level since the new tariffs in April.  The decline was steepest among younger and lower-income consumers.  In particular, the outlook for future labor market conditions weakened.

 

It was another good week for mortgage applications, especially for refinancing, according to the Mortgage Bankers Association (MBA).  Applications to refinance rose 9% from last week and were a massive 111% higher than one year ago.  Purchase applications increased 5% 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.  With the government shutdown, it likely will be another light week for major economic data.  The ISM national manufacturing sector index will be released on Monday and the services sector index on Wednesday.  The key Employment report is scheduled for Friday, but it is expected to be delayed.

 

 

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