Most of the comments I received to the RUNdown last month were regarding my opening tag line of “Howdy”. And I’m doubling down!! Before we get into the not so fun updates, here’s a pic of Ozzie in one of my favorite shirts of his.
Now that you’re happy, here is our 30-year mortgage rate chart since August. Safe to say there aren’t any refinances for a better rate taking place right now. Let’s dig into why, and if you make it far enough, maybe I’ll surprise you with another family pic.
The Fed just hiked rates for the first time in three years. The FOMC raised the Fed Funds Rate a quarter point this afternoon, bringing their new target range to 3.75%-4%. While this coincides with a recent jump on the above chart, this was largely priced in and did not move mortgage rate markets. The vote was unanimous and updated projections showed 16 of 18 Fed officials expect another increase this year, with four seeing two more as possible. That decision is largely on the back of continued high inflation (3.4% CPI in August) and surprisingly high job growth (162k new jobs in August). The move alters the direction the committee had been traveling, undoing its last move which was a rate cut back in December 2025.
The Dot Plot:
Every three months the Fed provides their famous “dot plot” which I’ve always liked as a visual learner. As mentioned above, the Fed's updated dot plot reveals that a strong majority (16 out of 18 officials) project one additional 25-basis-point rate hike before the end of 2026. Their projections indicate that borrowing costs will likely remain flat through 2027 before seeing potential cuts in 2028-2029.
The Bond Markets:
The nerd in me likes to cross reference the above dot plot with the bond market’s expectations. Right now, the bond market is pricing in a 38% chance of two more hikes this year, and a 60% chance of 3 hikes by the end of 2027. Our 18 Fed officials are expecting significantly less comparatively, coming in at 22% chance of two hikes this year and all members expecting a maximum of 2 hikes by the end of 2027, with a majority expecting one or fewer. This is somewhat good news, in that the bond market and thus current 10 year treasuries and corresponding mortgage rates, are pricing in worse than what our Fed officials think will actually come to fruition. Generally speaking I think our Fed officials do a great job, and if our Fed officials are more accurate than the bond market, all else equal, rates will come down.
10 Year Treasury:
Speaking of the 10 year treasury yield, for the first time in my career it has surpassed 5%. In fact, it’s the first time since March of 2007. That’s the reason for the >7% mortgage rates you’re seeing right now, not the recent Fed rate hike. Currently, mortgage rates follow an easy formula of the 10 Year Treasury % + ~2.25% in spread for the investing bank. That spread has consistently been between 2-2.5% over the last few years and shrinks when there are a lot of investors getting in the residential lending space, and grows when they aren’t. See below for the 10 year treasury yield over the last 5 years (to make you feel sad) and last 45 years (to make you feel happy).
Buy before you sell gaining momentum:
Fannie Mae just announced an important change that will make it easier for existing homeowners to purchase their next home before selling or to keep their current home as a rental. Under Fannie Mae’s new guidelines, a lease is no longer used. Instead, we can establish the home’s market rent through a rent appraisal or supported rental-market analysis.
Here’s how it works:
We use 75% of the supported market rent.
For example if the rent appraisal shows projected rent of $4000, we can use 75% of that ($3000)
If the rent does not fully cover the payment, only the remaining shortfall is included in the buyer’s debt-to-income ratio.
Buyers with less than 12 months of landlord experience will need six months of reserves for the departing residence.
Key takeaway: This creates more flexibility for move-up buyers and homeowners interested in building a rental portfolio. Many prospective homeowners may no longer need to sell first, make their purchase contingent on a sale, or find a tenant before closing on their next home. However, it does come with the risk of holding two mortgages and having trouble selling after you’ve already purchased your next home. Please reach out if you want to discuss more!
You made it this far, you definitely deserve a baby pic.
I still am seeing plenty of potential buyers so don't get too discouraged if you're selling/thinking of selling. If you know of anyone buying (not just in CO, I am licensed in Nebraska and Washington as well), please give them my contact info. I would love to help them get the lowest rate possible.
