How The New Fed Chair Could Change Your Mortgage Rate

DANO WEIR: Have either of you heard that thing, time is a flat circle? You ever heard that phrase?

SPEAKER 2: No.

DANO WEIR: It's this idea that time is actually this past, present, future loop that just is repeating over and over and over again.

DANO WEIR: Something like, it's 1987, there's a New Fed president, inflation is high, rates are high, and there's fears of a stock market bubble.

DANO WEIR: It's 2006, there's a New Fed president, inflation is high. Rates are high and there's fears of a stock market bubble. It's 2026. There's a New Fed president. Inflation is high. Rates are high and there's fears of a stock market bubble. And we're going to talk about it.

DANO WEIR: Money is really good. If you're checking out, It's All Money.

DANO WEIR: Welcome to the Sonoma Wealth Conference Room on Broadway in the city of Sonoma. We're Sonoma Wealth Advisors. My name is Dan O'Weir and we are talking rates today. What's happening? What's going to be happening? New Fed president. What could this all mean? Joined today by Clay Dunkel, one of our advisors and the VP of Mortgage Lending For Guaranteed Rate in Napa, Linda Zeiss. Welcome, Linda.

SPEAKER 2: Thank you.

DANO WEIR: Welcome, Clay.

CLAY DUNKLE CFP®: Thanks for having us.

DANO WEIR: Linda, before we extrapolate or theorize on what might happen with rates, let's take a look back. So let's talk about the last four years and as a lender, what you've seen in the mortgage industry.

SPEAKER 2: So in the last four years, well, actually I've been doing this for 28. So in my experience, we usually can have an idea of what's going to happen with rates in the market. The last four years really has been unpredictable. It's thrown us off a bit as far as where we think rates should be. As things happen, I'll watch the market and lock as we go, but you just can't predict it.

DANO WEIR: And has been markedly higher in the last four years than it was in the prior 14.

SPEAKER 2: And even with the pandemic bringing rates down so low, I think we made a mistake there, which now it's gone the other way where rates have been too high. In the last year, like, for example, in the last few weeks, I've been locking at 6.5 or lower.

SPEAKER 2: So rates certainly have come down in the last few years. They're not where people want to see them. You know, there's still some uncomfortableness about... Being able to buy homes because of where rates are.

DANO WEIR: What's the nastiest rate that you had to lock? I mean, it was eight, nine.

SPEAKER 2: In my life?

DANO WEIR: Yeah, in your life and recently.

SPEAKER 2: Yeah, so eight, eight and a half. And that was with a point that was back in 2001. And more recently, 7.75. That was probably two years ago where we were that high.

DANO WEIR: And during the pandemic, you were what, three?

SPEAKER 2: Pandemic's at lowest 2.6. My lowest refinance, yep.

DANO WEIR: 2.6. Yep. 2.6.

SPEAKER 2: That's my happiest client.

DANO WEIR: So with rates where they've been recently, what have you seen then in the housing market? Because you're working with realtors as well in Napa and Sonoma.

SPEAKER 2: Yeah. So in the housing market, we're seeing more homes on the market longer. I think there's some hesitation with people with the anticipation of rates going down that they're going to wait.

SPEAKER 2: And there's homes that will sell quickly. So it just depends. I know we have a lot more cash buyers too coming in.

SPEAKER 2: But I find that if the couple or family finds a home that they want, there's a way to make it work with where rates are today. And then you work with them as rates, you know, change, hopefully come down further and refinance them.

DANO WEIR: Clay, I wonder if you could give kind of the market perspective on this because there's a lot of misconceptions about when we say, we've even just jumped right into it. Rates, setting rates, Fed rates, you know.

DANO WEIR: There's a little bit of an assumption that people understand exactly what's going on. Can you give our viewers, give our clients a rough description of the flow from the Fed funds rate, how that impacts mortgage-backed securities, and then down to the end consumer and Linda's clients?

CLAY DUNKLE CFP®: Yeah, so the Fed sets the Fed funds rate, and that's the overnight borrowing cost for banks. From there... Banks are typically, I think prime is three points above Fed funds. So prime is the rate where banks are lending out to their credit worthy customers, right?

CLAY DUNKLE CFP®: So mortgage rates are sort of tied to that, but mortgage rates, I think, follow the 10-year treasury a little more closely. And the 10-year treasury is a little bit more broad.

DANO WEIR: It's not just the Fed funds rate, right? They're taking in the totality of the market and all the circumstances to come up with. With that rate. How does it end up when I'm sitting with Linda and I go, I want to get a mortgage that the rate is as high as it is? How does that all flow from one decision potentially and factoring in the market as well? How does that eventually end up impacting the client?

CLAY DUNKLE CFP®: Yeah, well, I think the Fed funds rate is a pretty good indicator of where short-term rates are, right? And that leads into the 10-year treasury. So the 10-year treasury is like, what do we think the Fed funds rate is going to look like in the future? So there is some prediction going on there. And that's ultimately what's going to be guiding mortgage rates.

DANO WEIR: Have Linda correct me if I'm wrong.

DANO WEIR: Have there not been more recently some, you've talked about some strange things, unpredictable things. Have the two been disconnected more recently in that mortgage rates are perhaps higher? The market is saying it's higher than what the Fed is trying to set it at. Are you seeing that more?

SPEAKER 2: Yeah, yeah. And we follow, from my perspective, the 10-year. And so that's what we reference. And so as that changes and there's no real correlation, rates will increase. So like this morning, we thought things were going to be great. And then this afternoon on my drive over, we were alert to lock. So yeah, it's truly unpredictable.

DANO WEIR: Clay, when you're sitting with clients, and you're talking about lending, how do these, you know, the unpredictability of rates, how does that play into how does lending in general play into how you work with a client in their portfolio?

CLAY DUNKLE CFP®: Depends on the context, I think.

DANO WEIR: Okay, so what are some instances? They want to buy a house, they need some equity, they need cash out.

CLAY DUNKLE CFP®: Interest rates in general, more so than lending, I'll go that direction. Because as an investor, interest rates are important.

CLAY DUNKLE CFP®: There's stocks, there's bonds, there's cash, there's real estate, all these different types of investments. On the bond side, the interest rate is very critical because that's the coupon that you're getting for lending out your money. So where interest rates are currently and where they're heading, that's going to dictate what your return is and what your risks are potentially.

CLAY DUNKLE CFP®: So that's a conversation that we're having. I think a very concrete example of that is for somebody that has CD money and they're trying to decide, do we buy a 12-month CD? Do we lock it in for a little bit longer? Do we go three months? That's really high right now. And that's where you kind of play that game like, well, where do we think rates are heading? And like she said before, it's really hard to predict.

CLAY DUNKLE CFP®: I think that last I checked. The probabilities were staying flat over the next year to maybe a potential 25 point increase, right? 25 basis point increase that shifted from, you know, two weeks ago when I looked at the probabilities. Yeah.

DANO WEIR: So the narrative here, and it's a very dense story, but the president. I think at some time forgot that he appointed Jerome Powell because he actually asked who put that guy in there. He was our Fed president. And since there's a new appointee, Kevin Warsh, Powell is staying on still as a governor, which is a little unique.

DANO WEIR: But the thought was, OK, Trump's going to put in someone because the president has been saying frequently that, you know, we need to cut these rates. We need to cut these rates. And he's putting in a New Fed president.

DANO WEIR: It was very much believed that he would then be there to just, you know, cut away. And now. You know, prediction markets, many other experts are looking at that potential increase. So, Linda, what does that do to the to the real if that were the case for the next year? What do you see that doing to the real estate market?

SPEAKER 2: So I think of rates, we know that we've gone, we've bought homes with higher interest rates. What happens if the rates are higher, homes stay on the market longer, it is a buyer's market, because you can negotiate now if the homes have been on longer and it helps you. It helps the affordability for those people as well because they're not having to buy at such a high price.

SPEAKER 2: And once you get into the home, and I just believe in homeownership so much, but if you can get into the home and then watch the market over time, then you can adjust your payments. But right now, the way the housing market is, there's a lot of negotiation.

SPEAKER 2: Some homes will sell like that depending on the home. And others are staying on the market. So there's the buyers able to negotiate price, repairs, credits, that kind of thing. So I think that's a plus with the higher rates.

DANO WEIR: It's definitely, yeah. Thank you for looking at it that way. Because let's, when you think of high rates and when you think of where it is right now, it's very unaffordable, right? To get a lot of, you know, it's not as, it's more expensive now than it would be if rates were lower. But you also forget that when rates were lower. It's 14 offers on a property.

SPEAKER 2: Yep.

DANO WEIR: And it's, I don't know if anyone remembers the real estate tipping that was going on. And it was just expected that you were 10%, 20% over if you really wanted this house. You know, that was just happening. That was just commonplace.

DANO WEIR: And now with rates where they are, even though it seems like, man, that's so much more expensive in a way. It almost ends up being a push. I mean, it's sort of, it's strange when you think about it like that, but you sort of have more power with a higher rate.

SPEAKER 2: You do, because there's less people in the market too. There's people waiting on the sidelines for rates to come down. So the people who are looking to buy now have a purpose and they can negotiate. Yeah.

DANO WEIR: We're talking about rates. This is It's All Money from Sonoma Wealth Advisors. Linda Zeiss and Clay Dunkel joining me.

DANO WEIR: Clay. What can you say? Do you even want to venture a guess what you think are going to happen with the rates you mentioned potentially an increase, but do you feel like that's really going to happen? Do you feel you have any sense based on when you will look at the market, what might be happening in the next 12 months?

CLAY DUNKLE CFP®: That's a, that's a tough call.

DANO WEIR: You don't want to say it on camera. No, I mean, I.

CLAY DUNKLE CFP®: I, I usually go with the futures markets and say, you know, here's where the probabilities are at and try not to hazard a guess.

CLAY DUNKLE CFP®: It's easy to say they're going to be similar to where they are right now. I mean, that's the easy answer. And that's sort of what the probability markets have been saying for the last, even with everything that's going on in Iran right now. They're saying, hey, we think, you know, a year out, we're about where we are, maybe even a little bit lower.

CLAY DUNKLE CFP®: It's like, okay, well, what about the, you know, price of oil going up? That's going to impact inflation, potentially rate hikes, blah, wasn't priced in. It stayed kind of consistent with what it was three, four months ago. But only just this last week or two is where we saw a slight shift in the positive direction, not positive direction, but shift higher.

DANO WEIR: So just like I don't know what the stock market's going to do over the next three months or six months. It's, I can't say where the rates are heading. Yeah. And it's funny because Darren says this all the time.

DANO WEIR: Managing principal, but he says people come to us, you know, because they're looking for the expert advice and we get to say, hey, great. We don't know either. Yeah, we think we know based on history, but you never end up truly knowing.

DANO WEIR: Linda, you mentioned that home ownership is really important to you and you feel that strongly for your clients. So what is, you know, if you've got a young couple who've never bought a home before, they're going to sit with you and they're going to say, I can't do it. And you're going to say what?

SPEAKER 2: I'll show them ways that they can. I have you a program that I share that shows different loan options, different payment options, and help them decide and know, okay, this makes sense. I feel like I can't afford this. We also talk about that they can adjust their pay based on what deductions they'll get from home ownership so that they get a little bit more in their paycheck.

SPEAKER 2: And then they get to start shopping. And I think it's, well, it definitely is an emotional thing when you buy a home. You get connected to the home, you get an idea that this is the place where I want to live. And when that starts to happen, then there's a way to make it all come together for them. I did want to say something about when you started off about time.

DANO WEIR: Yeah.

SPEAKER 2: When we talk about predictions and where the market might be, all we really have is right now. We just have now. So if this is the market and this is, you know, these buyers want to buy, this is what we have. And there's ways you can buy down the rate.

SPEAKER 2: There's just ways to make it work. And then you go from there. Because we really can't predict. And we look historically. But like I said, the last four years has not panned out that well as far as looking at that kind of information.

DANO WEIR: And before the show started, we were talking backstage. And I was sharing my own story in Petaluma of buying my home. And when I bought it, at the time, it was considered high. And it was... Over 60% higher than it'd been, like two years prior because we were coming off of 2008. And I remember just being so mad and I'm just like, I missed it.

DANO WEIR: No, I missed it. I could have had it this price. Oh, I'm sorry. I gotta, I should probably wait for it to go back down. And, and, and all it's done since is nearly double. And so it's, it's, it's just as you're saying right now, if it's something you want to do, you kind of just got to take it where you're at. And it's the same thing with the market, Clay.

DANO WEIR: I mean, there's buying opportunities that you missed. You know, if we'd only known on Liberation Day when the tariffs were announced that the market would bounce, you know, from there till now, I think it's 20, 30% somewhere around there. A pretty significant bounce. You just, market timing is something that you just can't do.

CLAY DUNKLE CFP®: Yeah. Even just the last month, month of April. Good month?

DANO WEIR: Well, Linda, what are some other tools beyond the first-time homebuyer? So let's say somebody is sitting in their house, and perhaps they're what's called cash poor. They don't have a lot of liquid assets lying around. What tools do you have available for someone in that situation?

SPEAKER 2: So I always look at what kind of income they have. So we have ways to refinance based on income. We also have reverse mortgages, which are becoming more popular. I got certified in this because we're finding... People are living longer. People want to stay in their homes.

SPEAKER 2: And most people who've stayed in their home a long time wanted to have it paid off. And so now it's paid off and they have no money. So it's a way for them to continue to live their life and use the equity in their home to help facilitate that.

SPEAKER 2: I do all kinds of loans, FHA, VA.

SPEAKER 2: We do equity lines. So it just depends on the situation. And that's actually one of my favorite things is structure. You everybody's situation is different and everybody's needs are different. So you sit down, talk through what they're looking to do, and then I can show them those options.

DANO WEIR: What is the amount of time you're spending with a client? I mean, are you, is this something where 20 minutes you're trying to work through as many people as possible? I know it's not that. Tell me exactly, you know, what, what is the level of the, of specificity you're getting for their situation?

SPEAKER 2: So I do an initial call to, to understand their goals. And then I can work through options. And it's so safe they're buying a home.

SPEAKER 2: And then they start looking for their home. So it can be hours over time. It can be months. It could even be a year that I'm working with them till they find the right place or have things in order. I work on credit too. So if there's reasons their credit is not great, I can help them get their scores better.

SPEAKER 2: Like how? What are some things you can do? So easy things are, and I'd have to look at the report. This is not like everybody should go do this. But sometimes just adding you as an authorized user can bump your score 100 points.

SPEAKER 2: Sometimes people are unaware of medical bills that showed up on their credit. Balances. Credit looks back 12 months. So if you had a bad situation with credit and you said, I fixed it, I'm not using credit anymore, it only can see the bad credit because there's no new credit established.

SPEAKER 2: So it's not paying the balances off completely, but showing that you're using the funds and repaying them. So there's a whole trick to credit. But I always work to get the highest score because lenders put focus on that number and that's where you get the best interest rates.

DANO WEIR: As I mentioned, your office is over in Napa. Talk to me about that real estate market and some of the realtors you work with and what makes Napa a unique place to do real estate.

SPEAKER 2: So Napa has so much. They have residential and then rural residential. They've got vineyards that people buy that, you know, they've got an area that's family focused.

SPEAKER 2: That country like I mean, there's just so much there that's unique and different.

SPEAKER 2: And I actually work all over. So I work all over California. I'm licensed in other states. So as clients over the years have moved, I've got licensed in other states. So I kind of like that, too, because I see what. Other areas are doing market-wise.

DANO WEIR: Is it true that you've done a loan for a child of a client who you initially did a loan for? Did I read that right?

SPEAKER 2: Oh yeah. Yeah. Yeah. Several. Yeah. And then the kids. Yes.

SPEAKER 2: Yeah. Yeah. And then a lot of the clients that I've worked with initially are retiring. I'm like, wait, wait, you know, so they built their wealth and they're doing great, but I really do love what I do. I don't, I can't imagine not doing this. Yeah, of course. Yeah.

DANO WEIR: Of course. Well. This how do you say this you're you've done this you said 28 years so what are some of the rates that you saw when you first started versus versus now and how have things changed so rates when i started i can honestly say seven and a half is where they were it was in 1998 and we were starting to be.

SPEAKER 2: On a declining market so i got in at the right time and i was able to i just started i i actually worked in silicon valley in high-tech sales with them I had a six-figure salary back then, but I wanted to be closer to home to be with my kids.

SPEAKER 2: So I jumped and did straight commissions with a mortgage. So I was in a declining interest rate market. So it was great because I just kept getting business. I talked to somebody in an elevator and I got their loan. So you really can do a lot of talk to people about housing.

SPEAKER 2: Build their confidence. And then I've had the other things like with 9-11, the market, we were just like, what's going to happen?

SPEAKER 2: And then the whole debacle with the housing market. Oh, I remember that. Part of, they were doing interest only first and second loans and people just had to literally breathe. I never did those loans where you don't have to show income or assets, but that pushed the prices up because people now only had to pay interest.

SPEAKER 2: They didn't have to pay the full payment. And so house prices went up because they, or people would buy houses more expensive because the payment was affordable, even though it was interest only. So. That was not great.

DANO WEIR: What were you thinking during that time? I've always wondered what other, because I mean, some lenders were, you know, doing very well giving out those kinds of loans, right? They didn't care because it wasn't on their balance sheet. Right. What were you thinking at that time?

SPEAKER 2: I always am about the client. When I first started, a guy that I worked with said, if you focus on the client's needs, it will, you know, money will come to you. You don't have to worry about it. If you focus on your own, it's different. So for me, I would never do those loans. I was concerned about how people could do that. It just didn't make sense to me.

SPEAKER 2: And like I said, I've always just focused on what's best for the client, which you have to do, right? But there are those who didn't.

DANO WEIR: Well, we experience that all the time, Clay, when it comes to other advisors. So it's sort of a fiduciary type approach.

SPEAKER 2: Right.

CLAY DUNKLE CFP®: Ninja loan. Yes.

SPEAKER 2: Is that actually what they job? Is that a serious.

CLAY DUNKLE CFP®: That's just a joke or? No. Is that what they called it?

DANO WEIR: Ninja loan it was in the movie and it was in the big short right exactly yes exactly so the answer is we don't know where rates are going to go and that's okay we never promised you that we would know but talked about some some various scenarios whether you know this is the market that we have and the bottom line is is if you want to buy i personally believe exactly what Linda believes which is that it's always possible it's maybe not possible in the way that you would like to have it happen But especially if you work with a good lender, if you get a good partner, get a good realtor, get a good financial advisor, you know, you can come up with a plan for just about anything.

DANO WEIR: So, Linda, where can people contact you and learn more about your services?

SPEAKER 2: This is my cell number, 925-918-0007. And I'm Linda Zeiss. And the company is called Rate.

DANO WEIR: And we'll get that in the show notes as well. Of course, you can find Clay and us at SonomaWealth.Com. You can book your wealth analysis. And learn more about how we help clients come up with holistic financial plans and solve problems. So, Linda, thank you so much for joining us today. Thank you. Good to see you. Thank you, Dan. Bam.

SPEAKER 2: I get knuckles. All right.

DANO WEIR: See you next episode. Thanks for watching and listening to It's All Money. We hope today's episode shared information to increase your financial confidence. Now is the time in the show for the voiceover with a bunch of words at the end. Listen close, though. You might find out something you didn't know. It's All Money is powered by Sonoma Wealth Advisors.

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