I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), based in Tiburon. I’ve been originating mortgages in California since 2000, which means I’ve sat through about a dozen Fed cycles, several of them ugly. Here’s my read on what happens Tuesday and Wednesday at the FOMC meeting — and what it actually means if you’re buying or refinancing in California right now.
What the Market Is Pricing Right Now
As of Friday, fed funds futures are pricing a 70% probability of a rate hike at the September 16–17 meeting. That number moved up sharply after Thursday’s producer price index came in at +0.4% and Brent crude closed above $107 a barrel. Oil above $100 is an inflation problem the Fed can’t ignore — energy feeds into everything from transportation costs to manufacturing, and it shows up in CPI with a 4–6 week lag.
The August CPI number that came out Friday was essentially in line with expectations. That’s the good news. The bad news is that “in line” isn’t the same as “on the way down.” With oil at these levels, September CPI — which the Fed will see before its November meeting — is almost certain to come in hotter.
My Actual Read: They Hike
I think they hike 25 basis points. Here’s why.
The Fed has spent the last 18 months trying to get credibility back after missing the 2021–2022 inflation surge. Jerome Powell is not going to let a 70% market probability go unfulfilled unless something breaks between now and Wednesday morning — a bank failure, a major credit event, something that changes the calculus. Absent that, walking away from a priced-in hike would be read as hesitation, and the Fed can’t afford that signal right now.
There’s also the oil wildcard. The U.S.-Iran situation isn’t resolving quickly. Energy analysts I follow are modeling $100+ Brent through Q4. That’s an inflation tail risk the Fed is absolutely aware of, and hiking now gives them a buffer.
What a September Hike Does NOT Do to Mortgage Rates
This is the part that confuses most buyers, and I want to be direct about it: a Fed rate hike does not automatically push mortgage rates higher in the short term.
The federal funds rate is an overnight rate — what banks charge each other for one-day loans. The 30-year fixed mortgage rate is priced off the 10-year Treasury yield, which moves on inflation expectations, economic growth outlook, and bond market supply and demand. These two rates can and do move independently.
In fact, there are scenarios where a Fed hike actually causes mortgage rates to drop. If the market interprets the hike as “the Fed is finally getting inflation under control,” bond investors buy Treasuries (driving yields down), and mortgage rates follow. I’ve seen this pattern play out in 2006 and again in late 2023.
What’s different this time is the oil situation. If energy prices stay elevated, the 10-year yield has room to move higher regardless of what the Fed does Wednesday. That’s the scenario that keeps 30-year rates in the 7%+ range through the fall.
What This Means for California Buyers Right Now
I had a buyer in Marin last week who was waiting to see what the Fed does before submitting an offer. I understand the logic, but I want to push back on it a little.
The market does not pause for the Fed meeting. Sellers don’t pull listings. Competition doesn’t disappear. What I’ve seen happen more than once is that buyers wait, rates move 20 basis points in either direction, and they’ve lost 2–3 weeks and possibly a property they wanted.
Here’s how I think about it: if rates drop 25 basis points after the meeting, that’s $150–$200/month on a $1.1M loan. Real money, but not the difference between qualifying and not qualifying for most of the buyers I work with. If rates go up another 20 basis points, same math in the other direction.
What moves the needle more than the Fed meeting is your rate lock strategy and your loan structure — and those are things we control.
If You’re in Contract Right Now
Make sure you know exactly when your rate lock expires. A lot of people locked 45 days ago at rates that look different today. Call your lender before Wednesday and understand your extension options. Extensions cost money, but letting a lock expire in a rising-rate environment costs more.
If you’re pre-approved but not yet in contract, talk to your lender about a float-down option or a longer initial lock. Yes, it costs a little more upfront. Right now, it’s often worth it.
The Bottom Line
I expect the Fed to hike 25 basis points Wednesday. I do not expect that to immediately push mortgage rates meaningfully higher or lower — the real driver is what the 10-year Treasury does in response to the statement language and press conference. If Powell sounds hawkish about future hikes, yields go up. If he signals this might be the last one for a while, yields could pull back.
I’ll have the full post-meeting read in Wednesday’s market update. If you want to talk through what this means for your specific situation before then, call or text me.
Michael DiVita — Mortgage Broker, Tiburon CA
DRE #01372066 | NMLS #241655
DiVita Home Finance, Inc. — DRE #01818285 | NMLS #323700
📞 (800) 239-1103 | Text: (310) 849-9124
