Hi Reader,

The average 30-year fixed mortgage rate ended Friday at 7.57%, up from 7.43% the prior week, according to Mortgage News Daily. Freddie Mac’s weekly average jumped to 7.28%, up from 7.03% the week before.

So, why are rates still moving up?

The 10-year Treasury is doing the heavy lifting

The 10-year Treasury, one of the most important benchmarks for mortgage rates, hit levels we haven’t seen in more than two decades last week.

​It climbed above 5.30%, briefly reaching 5.342% on Wednesday, its highest level in 24 years.

​This morning, it was up again after dipping slightly on Friday:

There are a few reasons the bond market is suddenly so unhappy:

1. The economy is proving harder to slow down than expected.

​U.S. economic growth was revised higher last week. That sounds like good news, and in many ways it is, but a stronger economy also gives the Federal Reserve less reason to quickly back away from higher rates.

2. Inflation is still the problem that stubbornly won't improve

Oil and energy costs remain a major concern. Even as oil shipments through the Strait of Hormuz have recovered, crude prices climbed above $100 a barrel, while gasoline remained above $4.40 nationally. Supply concerns remain because of the Middle East conflict, threats to other shipping routes and attacks on Russian refineries.​

Basically, investors are worried higher energy costs will eventually show up in broader inflation.

3. Even bad employment news couldn’t keep rates down for long.

Friday’s jobs report was genuinely weak: the economy added only 29,000 jobs in September versus 84,000 expected, July and August were revised down by another 60,000 jobs, and unemployment rose to 4.2%. Treasury yields initially fell on the news.

But the relief lasted the blink of an eye.

The 10-year quickly moved back toward 5.25% as investors decided the employment report still wasn’t weak enough to outweigh concerns about inflation. The next CPI and PPI reports, oil prices and geopolitical developments are likely to play a major role in what the Fed does next.

Here's the important thing to remember:

Mortgage rates aren't simply waiting for the Fed to cut or raise rates. The bond market is looking at inflation, economic growth, oil, government debt and what it thinks the Fed will have to do next.

And right now, the bond market sees enough inflation risk to demand higher yields.

Meanwhile, people are still buying homes

Despite all of this, Crain's reported that Manhattan just posted its best third quarter for residential sales since 2022.​

​Douglas Elliman's July numbers also show an interesting split: condo prices increased while co-op prices declined:

And financing contingencies remain very much part of the market. About 70% of co-op transactions were contingent on financing.

And then there is Fairfield County.

​According to Douglas Elliman, home prices there were up 9.8% year over year in Q2.

Today's rate isn't historically unprecedented. The problem is the combination of today's rates and today's home prices.

One thing I am watching very closely right now

This latest rate move is big enough that I am seeing some borrowers break out of their DTI mold between preapproval and closing.

Someone who comfortably qualified several weeks ago may suddenly be tight if their rate wasn't locked, their loan structure changes, or the property comes with higher taxes or carrying costs than expected.

So if you have a buyer who gets declined, suddenly doesn't qualify for the house they expected to buy, or another lender tells you the numbers no longer work, call me before you give up on the deal.

There are often different ways to approach the financing:

1. Changing the loan product
2. Restructuring the scenario
3. Adjusting cash to close
4. Using a different lender, or
5. Looking at the qualification from another angle

A rate bump doesn't necessarily have to become a dead deal.

I ❤️ mortgages, so you don't have to!

I hope your week is off to a great start!

-Nicole

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Nicole Hamilton Bernheimer | NMLS #2354049

nicole@homeownering.com, 917-650-0167

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