As rate-cut hopes fade, a top LO says the real discussion with buyers has moved on to buydowns, budgets, and building in flexibility
Interest rate hikes by the Federal Reserve could be firmly back on the table, with financial markets seeing a growing chance of rates rising before the end of the year.
That’s marked a dramatic shift since the beginning of 2026, when hopes were high that potential central bank rate cuts could put downward pressure on bond yields and mortgage rates.
For mortgage professionals, the change signals why it’s never a good idea to bank too much on rate path predictions looking to the immediate future.
“At the start of the year, we were hoping for another quarter-point rate cut,” Kristin O’Neil (pictured top), senior loan officer at Open Door Lending, told Mortgage Professional America. “Now, with inflation back in the conversation, the industry is talking about potential rate hikes ahead. That’s a real shift, and it’s a good reminder that none of us can predict exactly where rates are headed.”
Rethinking the market outlook
That uncertainty has changed how O’Neil frames the outlook for clients in her home market of Richmond, Virginia, where she says she’s stopped defining her own read on the market by which way rates are heading.
Mortgage rates have been on a wild ride in the year to date, ticking steadily upwards since the beginning of the US-Iran war in February but remaining below their level from 12 months ago.
“Honestly, I try not to tie my optimism or pessimism about the market to rate direction anymore,” O’Neil said.
Rate buydowns back in the spotlight
Rather than betting on the direction of the 10-year Treasury or the result of the next Fed meeting, O’Neil said her focus has shifted toward tools that lower a buyer’s payment today – starting with a reassessment of rate buydowns.
“I was never a huge fan of the traditional temporary buydown structure, where the upfront cost matches your monthly savings dollar-for-dollar,” she said. “My thinking was always, ‘Why not just put that money into a high-yield savings account and pull from it monthly if needed?’”
That calculus has changed, she said, pointing to steeply discounted buydowns by United Wholesale Mortgage (UWM) – offering “pretty significant savings” for borrowers. “And if a buyer can get a seller to cover even part of that through concessions, it’s an even bigger win,” she said.
Budgeting or waiting
Much of O’Neil’s guidance to buyers now centers on separating what they qualify for from what they can comfortably afford. “My advice has really been to get back to basics with buyers and help them hone in on a budget,” she said.
“Nine times out of 10, a client is going to be approved for more than where they actually feel comfortable monthly. Part of my job during preapproval is helping them see that maximum number but then, if it doesn’t align with where they want their budget to be, we backtrack together to find the price point that actually fits their life.”
That doesn’t mean rate is irrelevant, she said, but it’s one factor among several.
“Rate is still a big part of what plays into someone’s overall budget,” she said. “But there are so many creative ways to help buyers reach their goals beyond just waiting on rates: downpayment assistance programs, working with their agent to find sellers open to concessions that can buy down the rate, sometimes on a home that’s been sitting a little longer and isn’t as competitive. It’s really about focusing on the payment and getting creative, rather than fixating on the rate itself.”
A harder year for refinance-driven business
Looking ahead, O’Neil said she expects the back half of the year to be difficult for lenders whose business model leans heavily on refinance volume.
That’s partly because those rate drop expectations have fallen and buyers and brokers are no longer convinced rates will be materially lower between now and the end of the year.
Still, O’Neil remains positive on the mortgage outlook for the rest of 2026. “For the majority of real estate professionals who keep the big picture in view, helping clients build long-term wealth and educating them along the way, I think they’ll be fine,” she said.
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