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Rates Blinked. Did You?

Welcome to another edition of The Mortgage Minute! After weeks of playing hard to get, mortgage rates finally decided to throw us a bone this week and ended on a high note. Does this mean the wait-and-see is over and we’ll start to see some more positive trendlines? We’ll have to (ahem) wait-and-see. 

And whatever the market brings, we’re here to break down what’s next. This week, we’ve got some key economic data that could push rates in either direction, a Loophole Spotlight that goes more in depth on last week’s Pipeline Save of the Week about Authorized Credit Users, a sign that buyers are starting to accept that higher rates are here to stay, and a new program for renters that just might help you find that next great lead.

If you’re debating whether to read this now or later, remember: the housing market waits for no one. Best that you get up to speed in this five minute read.

Market Sentiment & Economic Calendar

The market right now feels like it’s just waiting for a signal – any signal – to make a move. Markets saw a nice shift on Friday, but we’ll have to see if that was a blip in the Matrix, or signs of things to come. While there’s a lot of good data coming out this week, Friday is the day to watch as we’ve got a bevy of reports dropping all at once, including the all-important Core PCE index (a.k.a. The Fed’s favorite inflation gauge).

What to Watch:

Tuesday, Feb. 25:

• Consumer Confidence: Consumer confidence is one of those underrated indicators that can tell us a lot about what’s coming next. If people feel good about their financial situation, they spend more. When they spend more, inflation stays sticky, and that gives the Fed less incentive to cut rates. But if this report shows a dip, it could signal weakening momentum, which might push rates downward sooner rather than later.

Wednesday, Feb. 26:

• New Home Sales: Builders have been navigating a tricky market – high rates have kept some buyers on the sidelines, but demand remains strong enough that they’ve been hesitant to drop prices too aggressively. If this report shows a slowdown in new home sales, we could see builders start rolling out even bigger incentives to keep deals moving. 

Thursday, Feb. 27:

• GDP & Jobless Claims: We’re getting the second estimate of Q4 GDP, which will give us a better idea of how strong the economy really was at the end of last year. The labor market continues to be a major factor in rate movements – if jobless claims show unexpected weakness, the Fed might have more reason to ease up on rate policy. But if employment remains strong, rate relief could be further down the road.

Friday, Feb. 28:

• Core PCE Index: This is the big one. The Core PCE index is what the Fed watches most closely when it comes to inflation. If this report shows inflation cooling, we might finally get a solid indication that rate cuts are coming later this year. But if it runs hot, expect more of the same in the months ahead.

For now, we’re still in watch-and-wait mode. But as always, those who stay ahead of the data will have the best chance to act when the market moves.

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Loophole Spotlight

Authorized Credit User

In last week’s issue, we talked about the Authorized Credit User strategy in our Pipeline Save of the Week, and a few readers wrote in asking for more details. If you recall, our borrower’s deal nearly fell apart after an unexpected 45-point drop. With a little creative brainstorming, the loan officer added a family member as an authorized user on one of their well-managed credit cards, boosting their score overnight and saving the deal. (You can refresh your memory on the full story here.) That got a few of you asking: how does this strategy really work, and what’s the catch?

Let’s break it down further and add a few pro tips to make sure you’re using this credit-boosting hack the right way.

Here’s how it works: A borrower gets added as an authorized user on a friend or family member’s credit card. But not just any card – this one needs to have a history of 100% on-time payments, low utilization, and be in good standing. Low credit utilization is a point that sometimes is easily overlooked, but it can make or break this hack. Think about it: we don’t want our borrower being suddenly tied to a maxed out credit card, now do we?

When done correctly, this move can add positive credit history to the borrower’s profile, sometimes (as we saw in last week’s Pipeline Save) boosting scores by 60 points or more. And not just for the most recent month posted. For the entire length of the card as if it’s been on their report the whole time!

Now, here’s the part where people get tripped up: Timing. 

Source: Giphy

Wait too long, or submit the wrong card, and your newly resuscitated deal could instead end up six feet under. 

Crucially, the card has to report before the new score reflects, and that varies depending on the card issuer. Some update at the start of the month, for others it might be mid-month or later. It all varies. A well-timed addition can make all the difference, but if the borrower’s resource has several cards that fit the description we provided above, some due diligence to make sure the card being added is going to be processed on the report in time could make all the difference – especially when working against a tight deadline!

And here’s a pro tip – some issuers (looking at you, AMEX) are slow to report new authorized users, sometimes taking months. If time is of the essence, have the borrower check which card has the fastest reporting cycle before moving forward.

This isn’t a magic fix, but for borrowers on the cusp of qualifying for better terms, it’s one of the easiest ways to move the needle without opening new accounts or taking on additional debt. Play it right, and your borrower could be waking up to more negotiating power for their purchase, a better rate for their home, and a lifelong client for you, who saved the day.

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