Rates Broke an 11-Month Barrier — Should You Lock Now or Wait for the Fed?

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We finally broke the 11-month barrier

Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, the Mortgage Mom. Last week we had some issues with the chat and the sound going in and out — I think it's all fixed, and Dad already jumped on to say it looks like it is, so we're giving Mikey a big thumbs up for that one. I came on fifteen minutes early today just to make sure everything works. Remember, this is an interactive show: put your questions into the chat and I'll read them out loud and answer them for you.

So let's jump in, because today we broke an 11-month barrier. For the last two shows I kept telling you we were at a standstill — we had a high barrier and a low barrier, and we could not break through them in over ten months. Today, at eleven months, we finally broke through the barrier that's been stopping our interest rates from getting to the next level.

Now, we didn't break through by much. The 150 level is where we kept hitting our wall and couldn't get into better pricing — and today we broke through it, hitting 153 the last time I checked. Let me actually pull it up live right now… I'm seeing 100.56. So we are very, very slightly over the barrier we needed to break — six basis points over. And this is still phenomenal news.

Why the new floor has to hold

One day over the barrier by six basis points isn't enough to move our needle significantly. What it does is create a new floor — and we want that new floor. But it's got to hold for at least another day or two before it really becomes the new barrier. We've got to close above that 150 mark today, then hold it another day or two. Then it becomes our new floor, which gives interest rates the opportunity to break out.

If you're into crypto or stocks and you watch the people who talk about them, you hear this all the time — breaking through barriers, the highs and lows of the last so many months, levels. That is exactly what interest-rate pricing does too. Are we going to hold? I'll be able to tell you next Wednesday.

Where rates are versus recent weeks

About two weeks ago I told you some good news had come out and rates started improving — and for the last two weeks they've not only held steady, there have been days where they improved a little further. Popped up a little, improved a little further — that's just how it goes. We're looking better today than we've looked in quite some time: better than two weeks ago, better than last Wednesday. Not better by half a percent — but we're getting an eighth here, an eighth there. I'd say we're already about a quarter percent better in rate than two weeks ago, and about an eighth better than a week ago. What we want is for that momentum to keep going — for pricing to hold above that 150 mark and make it the new low that we bounce off of.

What Powell said at Jackson Hole

Why are things continuing to improve? I talked about this last week: the Fed had its Jackson Hole symposium last Friday, and Chairman Jerome Powell was anticipated to speak — which he did — and the question was whether what he said would lead people to believe we'll see a rate cut come September. It did. Bringing it down into a nutshell, without going through the exact words: it was very strongly pushed forward that they are seriously considering cutting the rate in September. So we all want to keep our fingers crossed that the cut comes through. We need things to start changing; we need these rates to keep improving.

Lock now, or wait for the Fed?

Now, here's the big question I'm going to get, over and over, for quite some time: “I need to do a loan right now. Should I lock, or should I wait until the Fed announces they're cutting the rate?” It's a fair question — if you're not in the industry, it's common sense to think that if they're going to cut, you should wait. But the answer is actually no.

The way it works — and we've talked about where mortgage rate sheets come from for years — is anticipation. Because of what was said at Jackson Hole, the anticipation right now is that they'll cut in September. The improvement we'd see from that cut is already being worked into our rate sheets. That's why we're seeing improvement. That's why we finally pushed past the 11-month barrier today. So if you need to do something, get it done. Don't worry that you're going to miss out on a quarter-point or half-point cut — it's already anticipated and already in the sheets.

How day-by-day rate watching works

That doesn't mean you can't call me, do a loan application, and wait to lock. We may choose to wait. I work with all my clients day by day — honestly, more like hour by hour. We know where the rate is when you take the application. If the market's improving, there's no reason to jump the gun and lock. But nobody has a crystal ball — I can't see tomorrow, and definitely not two weeks out. What I can see is today.

So if you called me today and asked whether to lock, I'd tell you no — today the market looks good, we appear to be improving, and hopefully tomorrow's rate sheet is slightly better. Tomorrow we talk again. Now say some big report drops at one in the afternoon and my phone lights up with an alert — because obviously I've signed up for all of them; it's my business. I call you or text you as fast as I can: “It looks like we're starting to slide downhill. I think we should lock now.” And it is 100% up to you. You might say, “Nope, I'm a gambler, let's see what happens” — and I'll say no problem. You are in the driver's seat on a rate lock. Remember that even if you work with another lender: tell them, “Please don't lock my rate without talking to me first.” You are the driver.

And keep this in mind: no mortgage loan closes faster than seven days — by law, by disclosure timelines, we cannot close you faster than that. So on a loan we're starting today, we've got time to watch. The minute we see pricing slip is when we'd want to lock.

What if the Fed doesn't cut?

What happens if September comes and the Fed says, “We decided not to cut”? The anticipation of a cut is already built into the rate sheet — so what then? Everything goes berserk. Which direction? There's no way to say. Common sense says rates would shoot right back up, and the barrier we broke today might no longer be our low. But investors could read the decision differently and rates could even improve — or hold exactly the same. There is no way to know how the market will react when the Fed speaks. We've talked about how the inflation reports, the CPI, unemployment, retail spending all get interpreted by the market, and investors move their money on anticipation. That's just what this is.

And I'll tell you exactly what happens on cut day: I'm going to get phone call after phone call — “I heard they cut rates! Where are interest rates today? Should we lock in?” Since you're here watching and I'm educating you: understand that that day is not going to move the needle. Whether they cut a quarter, a half, or a full point, that day won't suddenly drop mortgage rates. What drops mortgage rates is anticipation — where investors move their money based on what they believe is coming.

Consolidating a HELOC: the blended-rate math

So should you be waiting? If it were me, I'd be starting the application — assuming you have something you need to do. A cash-out refinance to get debt paid off. A purchase — obviously you need your application going, whether that's a pre-approval or you're already in escrow or under contract. Money for home improvements. Whatever the reason: I would not stop. Do the application, talk with me or one of the girls on my team, and let's talk about the goal.

So many clients took home equity lines of credit over the last three years, because that was the cheapest way to get money when your first mortgage was at a very low rate. But a lot of those HELOCs are now in the 8, 9, 10, 11, even 12–13% range. When we take the $100,000 or $200,000 — whatever your number is — on that line and blend it with the low 3–4% rate on your first, you might be sitting at a blended rate of around 6% across all your money. And let me tell you: we are very, very close to 6% right now. I quoted a client today on a cash-out refinance on her primary residence — great credit, low loan-to-value — at 6 and an eighth on a 15-year fixed, and 6 and three-eighths on a 30-year fixed. Those are really good numbers. For many of you with a first at 3 or 4% and a second at 9, 10, or 13%, blending them together comes out to a lower overall rate and monthly savings — not to mention one payment instead of two.

We'll go into exactly how you get the rate you get another time, but understand: it depends on your credit, your loan-to-value, your property, your loan size — every scenario is different.

A possibly short window

Depending on what you need the financing for: don't stop, don't wait, and don't wait for the announcement day. If a couple more economic reports come out and the Fed changes its mind and doesn't cut, this could be a very short two-week window to get an application in and a rate locked. So if you've been thinking about doing something — looking at homes, trying to get under contract, getting escrow opened so you can lock, or refinancing for one reason or another — reach out and talk to us. We'll compare options and figure out exactly what rate you need for things to make sense to move forward.

And if you're out there looking at a home — gosh, get out there this weekend, for real. Look hard, start negotiating, start writing contracts, get serious. If you haven't been preapproved yet, reach out and get it done — you can't write an offer without a preapproval. You need to know you qualify. That's what my team and I are here for.

Wrap-up

Mary and Lori jumped on — great to see you both — and I'm just happy the chat is working again. If you tried to put a question in and I didn't read it, please email me directly and I'll respond immediately.

One housekeeping note: if you got a text from me today on the old “MOM” text list — the one about 4,000 of you joined back in the day — I'm retiring that list. To keep getting the weekly link when I go live, text the word LIVE to 844-935-3634. That's 844-WE-LEND-4, and it's also the number to call my office about anything mortgage or real estate. My website is mortgagemomradio.com — don't forget the “radio” — with the contact button, a loan application, the finance calculator, and the podcast version of this show. I'm here every Wednesday at 1:00 p.m. Have a fabulous rest of your week, and I'll talk to you all real soon.