Fed PAUSES Rate Hikes: What It Means for YOUR Mortgage Payment

[00:00:00] Dan Frey: On the foreign exchange side, the dollar's at a three and a half year low versus the Chinese yuan. And here we go, 7.30, 8.30 Eastern, July CPI hitting the wires, up one-tenth of a percent on the headline month-over-month number, exactly as expected. And the rearview mirror, as of this point, still unrevised, down four-tenths of a percent was a massive drop. [00:00:23] Speaker 2: So yesterday we got this consumer inflation number. It was basically at zero. Previously, it was minus four. So today we're going to take a deep dive into inflation. How does inflation really affect mortgage rates? Well, that's what we're going to talk about in today's show, folks. So if you're a realtor, maybe looking to buy your first house, or maybe you bought that house and you dated the rate and you're trying to figure out where mortgage rates are going to go from here. Because before the Iranian conflict, we had rates at like 5.99. So I'm going to explain to you how inflation and where it's coming from is really what's dictating where mortgage rates go from here and why oil is a huge piece of it. So, folks, my name is Dan Frey. I'm the host of the Rate Update. I'm also a licensed mortgage loan officer. I'll give you all my information at the end of this. So what I like to start each day with as a mortgage advisor is right through here. This chart. This chart is awesome. Okay. All you have to understand is this. That number right up through there. If it's green, that's good news. It means mortgage rates are going to get better. The bigger the number, well, the bigger the adjustment. Anything over 10 should really start to move the markets. Now, if we look at a two-day chart, look at this. Huge number. So, okay, let me explain to you guys what's going on. Okay, so let me first explain to you inflation. Okay, inflation is basically the price of stuff going up and up and up. And what usually causes it is we have too much money and we start to spend it. Like during COVID. If you looked at COVID's numbers, we had a spike in how much people had in their pockets. And people start spending, spending, spending. And the inflation rate went almost up to 9%. So now what we're seeing is we're seeing inflation on another piece of this. And I think I hopefully prove it to each day. We're showing inflation right now is basically energy created. When the war started in Iran, we had the 10-year treasury at 3.99%. We actually had, where this comes into play for you guys, we had mortgage rates at 5.99. So since then, we had, you know, basically rates going up and the culprit is oil. So let me explain to you what happened over the last few years. Last year in 2025, we had that thing called tariffs. Now, I'm coming up with a new special. We're going to try to figure out where that tariff, those tariff refunds are going. But last year, we had that tariff thing and it scared the markets. So prices went up and inflation went up. Okay, so I think we may have been gouged by a lot of these companies. And you're going to find out why now, because as the tariff monies get refunded, where's that money going to go? Okay, so that happened and that pushed up prices. And then tariffs were deemed illegal by the Supreme Court. Okay, so that money's getting refunded right now. And so then all of a sudden, the markets kind of settled down in. And inflation went down about 2.9%. And we need that at 2. It actually dropped to maybe about 2.6%. Right before the Iranian conflict. Then the Iranian conflict hit, oil prices skyrocketed to $120 a barrel, and then inflation jacked up and everything else. So if you look at all this, you look at it and say, okay, tariffs created inflation last year. Then between the tariffs and the oil situation we have right now, we had basically inflation dropping almost to the levels that the Federal Reserve wants. Then the Iranian conflict went and oil prices go up. So here's what I'm trying to say. We have inflation right now in a different manner. It's not basically because the consumers are spending too much. It's because we're spending too much on energy. So once that comes out of the equation, you're going to start seeing a lot of these inflation numbers coming out of the numbers. So let's get over to what I'm talking about. The Federal Reserve, they were created for two reasons. One was keep inflation in check. They monitor the PCE. This week, we got the CPI, which is consumer inflation, the stuff that you and I pay, and then producer inflation, where basically the inflation starts on the manufacturing side. We got that today, and I'm going to go over those numbers with you. Then on the unemployment side, we're looking at that saying, okay, it's low hire, low fire, but some of the numbers are starting to show some cracks. So we're going to dive into the jobs numbers because we got those today as well. So let's get over to today's account on my calendar so I can break this down for you because we get a slew of information in today. But let's just go back to what happened this week. Tuesday, we got an ADP payroll numbers. It said for the week, there was 11,000 jobs created. We need about 100,000 jobs created. So this needs to be about 20 or 25,000. So I'm saying it's kind of a weak market, but the unemployment rate's in check. So let's just say it's a low hire, low fire. Okay, so let's go to the next thing. Then we start getting consumer inflation. Okay, we got core, which the core strips out food and energy. I'll explain that here in a second. But we got core inflation that strips out food and energy. Last reading was zero. Remember, I came in and said inflation was at zero. Here's that number. They thought it'd go up to 0.2. Well, not 0.2. Then you go down to CPI year over year. This is kind of where the money ball number is. It was at 3.5. They thought it'd go to 3.4. It stayed at 3.4. So all these numbers are saying, okay, they're basically on track of where we're expecting them right now. So there's no huge increases. Okay, so let's go down to here. Here's where everybody's waiting for today. Producer inflation. Let's drive into and look at those numbers. You look at that number right here. Producer prices month over month. That's the PPI right there here. Last reading was negative 0.1. Remember I said this number was negative? Okay, it was supposed to go up 0.2 flat. This is a great number. You go up to core PPI month over month. This strips out food and energy. Okay. 0.4 is supposed to go to 0.3 to 0.2. So if you add in energy month over month, it's zero. If you don't add it in, it's actually at 0.2, lower than expected. So we're looking at this saying, okay, it's all oil-based inflation. So why would the Federal Reserve increase rates? Well, they're starting to change their tune now. So if you go over to this, the Federal Reserve's meeting in 34 days. What are they going to do? Well, let's just break over to real quick what I'm advising my clients. If you're working with us and you get a contract in right now, lock it in. Because the straight of her moves, if it gets bombed, oil prices go up to $100 a barrel, you're basically, your rate's going to go to 7%. So be careful. But if you're trying to close down the road, you're looking to build or buy, just watch two things. Watch oil, because I'm going to show you even more information on how this is driving the markets. And watch my channel. Within the first five, six minutes each day, I'm going to break down the charts of what's going on for today in the bond market. I'm going to give you the most important news for the day. And I'm going to break it down with, I've been doing this for over 38 years, explaining to you guys how this is going to affect mortgage rates. So watch those two things, because as soon as the Iranian conflict ends, and you see oil go down and stay at 70 or below, you're going to really start seeing mortgage rates move from there. So let's get over to see what the Federal Reserve's going to do. Remember we took a snapshot, I think it was last week, there was about a 70% chance the Federal Reserve's going to hike rates at the next meeting. Let's see what it's going to do now. Well, now it's changed a little bit. Okay, so the federal funds rate's 3.5 to 3.75 right through here. Okay, I can prove it to you right there, there's where it is. Okay, if you go over here, they're saying they're going to keep it the same at this meeting. There's now a 50% chance or more that they're going to keep it at the next meeting. Now there's no rate hikes until 2027 or almost 2028. I'm telling you guys, watch the channel, because as we get more and more inflation numbers and employment numbers, you're going to see all these go over to here. The Federal Reserve isn't going to do anything. They're going to wait for the Iranian conflict to end. And then what they're going to do next, if they don't do anything, they're going to cut. So without further ado, let's get over back to the chart and see how it's reacting to today's news. This is awesome. So up 31 ticks. What that's going to mean, that's maybe going to bring rates back to, yeah, we'll get back into the 6.6 something range. So if you're out there trying to buy your first house, reach out to us. I'd love to get you pre-approved. If you're a homeowner out there and you bought that house and you dated the rate, got some information for you, folks. But here's some tools we got. It's therateupdate.com. Just scroll down for you homeowners out there. Click right through here. Explore Rate Watch. What we're going to do is we're going to watch your rate or your payments, a whole bunch of other things. Because every time mortgage rates move, you're probably busy and you're like, okay, I missed that rate drop. You realize a half a percent or a full percent could save you a lot of money. So put your mortgage information in here. We don't sell it. Just tell me what rate you'd be interested in refinancing or how much of a monthly savings you'd want. What'll happen is it'll trigger us. Me or one of my teammates will call you and say, hey, congratulations. Your rate triggered. Let's look at the numbers and see how we can help you. So that's what we can do there. If you've already got a whole bunch of rate quotes and you're like, okay, now what do I do, Dan? I'm as confused now as I was before. Go to our loan estimate review. What you're going to do is you're going to upload your information right into this section right through here. What I'm going to do is I'm going to send you a personalized video back to go over what our fees would be and what our rate would be on what you're looking for. If we can beat that competition on both of those, I'm hoping to win you as a client. So that is it for today, folks. So we got the MBSs up 30 points. That means mortgage rates are going to come down just a little bit today. But continue to watch each day because each day as oil comes down, inflation is going to come down. You're going to see rates coming down. Thanks for watching. God bless. I'll see you back here tomorrow morning at the opening bell to let you know what the heck is going to go on with mortgage rates tomorrow, that day, and what my expectations are for the weekend. Thanks a lot for watching. See you next time. Bye-bye.