Mortgage Rates Hit Highest Level in 2 Years, Meta Tests ‘Human Concierge’ for Muse

Zaid Admani (0:00)

Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Wednesday, September 23rd. In today's episode, we'll break down why mortgage rates are back above 7% and why some home buyers are turning to riskier adjustable rate mortgages. We'll also tell you why Meta's new AI agent might have secretly had a human making phone calls for you. Then stick around to the end of the show to find out why Apple might owe you some money because of Siri. We got a great show for you today.

Let's go.

Yesterday was another interesting day for the stock market. The S&P 500 was literally flat on the day, technically down 600s of a point. Meanwhile, the NASDAQ did squeeze out a 0.5% gain for another record close. And once again, AI was driving a lot of the action, not just the winners, but also the losers. The financial sector was the worst performing sector in the S&P yesterday, dropping 2%. Some big names like Charles Schwab fell 6%, while JP Morgan and Bank of America fell 3%. And the reason for that is AI. The fear now is that AI agents like Meta's Muse could disrupt everything from wealth management and insurance to payments and banking. Now, yesterday, I mentioned that people were using Meta Muse to find cheaper car insurance. Well, Meta is leaning into that. The Meta team is promoting something called the Muse Money Challenge, telling people to have Muse hunt for savings on their streaming services and car insurance and gym membership. So if in the future we live in a world where personal AI agents are constantly moving your money around and comparing financial products and making sure every dollar is optimized, that could mean fewer fees for advisors and financial firms. So the market is starting to ask these questions now and trying to figure out which business model might get disrupted from personal AI agents. And this is what the market does, right? At the start of the year, the market thought software companies were cooked because of AI and vibe coding. And now it seems like the market thinks other sectors could be disrupted by AI, like financials. I personally don't think that banks are going to be that impacted, but I guess we'll see. Now, zooming out, we continue to get some relief on the macro side of things. Oil prices fell for the fifth straight session on Tuesday. WTI crude closed at $94 a barrel and Brent finished just under $100 a barrel. On top of that, Saudi Arabia also restarted their East West pipeline, which gives the country another route to move oil around the Strait of Hormuz. Although Reuters did report that getting the pipeline completely back up to full capacity could take several weeks. But yeah, the drop in oil prices is obviously good news for inflation. But you know, the bond market is still cautious here. The 10 year treasury yield finished Tuesday at 4.966%, basically sitting right below the 5% level we've been talking about. So we'll continue to keep an eye on the bond market along with oil and stocks and everything else happening. So definitely get subscribed to the podcast if you haven't already and tune in every day to stay in the loop.

Let's run through some headlines. Starting with mortgage rates. The average rate on a 30 year fixed mortgage in the US has jumped to 7.12% as of last week. This is according to data from the Mortgage Bankers Association. That is the highest mortgage rate since May of 2024 And this is why we keep talking about the bond market so much lately. Mortgage rates track long term treasury yields, especially the 10 year. And as those yields have climbed over the last few months, because investors are worried about inflation, government borrowing, and obviously higher oil prices from the Iran War, mortgage rates have also risen as well. Mortgage rates now are a full percentage point higher since the Iran War began back in February. And, you know, higher mortgage rates reduces purchasing power for home buyers. Like, for example, if you're trying to buy a house and your monthly mortgage budget is $2,500 a month, that means that you can buy a house for around $300,000, assuming a 20% down payment with rates at 7%. But when rates were at 6%, you could have bought a house up to $325,000. So higher rates are just crushing demand. I mean, the housing market was already frozen, but it just continues to get worse. Mortgage applications to buy a home are now 11% lower than they were a year ago. But you know, here's the stat that really stood out to me. Almost 10% of mortgage applicants are now choosing adjustable rate mortgages or ARMs. And I can see why a home buyer would do that right now because an ARM gives you a lower rate for the first few years. Right now, it's around 6.1%, which is more than a full percentage point lower than a fixed loan. Now these ARMs do reset to whatever rates are at the time in five to six years. So basically these buyers that are choosing an ARM are betting that rates will be lower in the future than they are today. And honestly, I don't think that's a bad bet, but what is notable is that when almost one in 10 borrowers are willing to take on future interest rate risk just to make the payments work today, that just tells you how brutal housing affordability has become. So yeah, the housing market just continues to be so weird. It's completely frozen right now. Mortgage rates are above 7%, yet prices aren't coming down meaningfully. I mean, you would think that something has to give at this point, but it's been like this for the last two to three years now.