Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
For anyone who is carefully following stocks and bonds, and in the market for a new house or mortgage, this is something you will want to hear. It’s true. The 3.00% rate is back. Except, I am sure in this case, if you are seeking immediate mortgage financing, this breakthrough is not something that is favorable for you. You see, the 3.00% rate that I refer to is that of the 10-year U.S. treasury yield.
Unfortunately for low-rate seekers, this detrimental news came to fruition this past Wednesday, a day full of much economic activity, including the Federal Reserve announcement, which added to an already busy week in the financial markets. In the morning, the ADP Employment Report was released, and it showed that there were 219,000 jobs created in the private sector in July, which exceeded the expectations of 173,000. Additionally, June’s employment figure was revised higher as well.
The markets began selling off based on those favorable employment numbers and in anticipation of the Fed meeting announcements. Although the Fed notes were from a previous session, and it would not factor in any recent economic data, bonds began to sell off. As expected, the Fed left rates unchanged.
That was no surprise. They had stated, however, that the economy was growing at a “strong pace,” which was more bullish than their previous statement of “solid pace.” The Fed also mentioned that “further gradual rate increases” are necessary and that inflation was not moving. These comments coupled with the stronger than expected employment data from the morning catapulted the 10-year UST to break above the psychologically and fundamentally significant 3% barrier.
For those keeping score, it’s a simple correlation – as bond yields increase, mortgage rates increase – and that is what we experienced throughout the day with multiple rate changes from several of our investors. By the time this article is published, we will have a much better indication as to where mortgage rates are headed. For those shopping for mortgage rates or looking to buy a home soon, I highly suggest you reach out to a mortgage professional who knows what this all means. Unfortunately, not all do.
Last week I was speaking with a client who very honestly and candidly told me that he was “shopping for the best rate” and was hoping to make his decision over the next few days. I always appreciate when a client is transparent with me – not only because I feel it’s the honest and sensible way to deal with people in a “sales profession” – but mostly because it helps me help them get the best deal! That’s right, when a client is forthcoming with their strategy, their logic, and their pursuits, I can arm them with the necessary insights, guidance, and questions to help them along their quest.
In this case, this client was telling me that I am very much comparable to the other two people that he has been speaking with. As we were discussing the three offers (including mine) earlier this week, I asked him what the other mortgage professionals were suggesting in regards to the upcoming Federal Reserve “announcement.” He indicated that they made no mention of it whatsoever. I also asked if they mentioned anything about the recent spike in the Japanese Bonds, and again, he noted it didn’t come up in conversation. After our call, he did ask them these questions plus some others that I suggested, and their response almost identically was that “everything is already factored in” and “it will have little-to-no impact.”
I, of course, disagreed with their sentiment and showed him some charts as to where the market is and what the risks versus rewards would be of waiting compared to locking-in then and there. Ultimately, I was right, but unfortunately, he didn’t yield my suggestion until it was a little too late. We were still able to lock him in at rates and fees almost identical to what I offered, but as for other rate-shoppers, they might not be as lucky.
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