Navigating the Week in Capital Markets
As July unfolds, the mortgage industry continues to navigate a complex mix of economic signals, global trade shifts, and legislative developments. In the latest episode of Optimal Insights, Optimal Blue experts Jim Glennon, Alexander Hebner, and Kevin Foley unpacked the week’s most pressing topics – from labor market surprises to the evolving role of transshipping in global supply chains.
This episode offers a timely lens on the forces shaping mortgage rates, borrower behavior, and lender strategy.
Here’s what you need to know this week.
Market Signals: What’s Moving the Mortgage Needle?
Labor Market Mixed Signals: The July jobs report showed 146,000 new jobs and a steady 4.1% unemployment rate. However, private payrolls added just 73,000 jobs – the weakest showing since October – suggesting underlying softness.
Rate Cut Odds Shrink: The strong headline labor data pushed the probability of a July rate cut to just 5%, with September still in play but increasingly uncertain.
Refinance Activity Holds Steady: Refi volume continues to grow as homeowners tap into equity, aligning with MBA forecasts and offering a bright spot in an otherwise cautious market.
Tariff Watch Continues: Reciprocal tariffs were delayed to August 1, giving negotiators more time but adding uncertainty to inflation forecasts.
The Transshipping Factor: A Global Trade Loophole with Mortgage Implications
This week’s the team highlighted transshipping – a trade workaround that’s quietly influencing inflation and, by extension, mortgage rates.
What It Is: Transshipping involves routing goods through a third country to avoid tariffs. For example, Chinese goods may be shipped to Vietnam, undergo minimal processing, and then be exported to the U.S. under Vietnam’s lower tariff regime.
Why It Matters: The U.S. is now targeting this practice in new trade deals. The Vietnam agreement includes higher tariffs on transshipped goods, signaling a crackdown. Enforcement, however, remains a challenge.
As Kevin Foley explained, “There’s some perception out there that companies are materially changing [products]… but they’re really just mostly just docking the ship.”
If enforcement tightens, expect ripple effects in housing-related goods and services – and potentially upward pressure on mortgage rates.
Legislative Watch: The “Big, Beautiful Bill” and Housing Provisions
Signed on July 4, the sweeping new legislation – dubbed the “Big, Beautiful Bill” – carries significant implications for the mortgage and housing sectors:
The largest expansion of the Low-Income Housing Tax Credit in 25 years
A new Veterans Housing Fund, financed by a 1% tax on corporate stock buybacks
An increase in the SALT deduction cap from $10K to $40K
Expiring solar and EV credits that homeowners should act on before year-end
While the bill extends tax cuts and increases the deficit, it also introduces spending cuts, particularly in Medicaid, creating a nuanced fiscal picture.
Practical Actions You Can Take Today
Watch Jobless Claims: Released every Thursday, this real-time indicator offers a clearer view of labor market health than monthly reports.
Monitor Tariff Deadlines: August 1 is the next key date. Any escalation could influence inflation and rate expectations.
Educate Borrowers on Rate Volatility: With long-term bond supply surging, mortgage rates may remain in the 6–7% range unless demand rises or deficits shrink.
Leverage Refi Opportunities: Homeowners are increasingly using refis to access equity. Lenders should be ready with tailored solutions.
This week’s episode of Optimal Insights underscores the interconnectedness of global trade, domestic policy, and mortgage market dynamics. From transshipping loopholes to labor market nuances, the forces shaping rates are anything but linear.
Listen to the latest episode of Optimal Insights for deeper analysis and expert commentary. Available on all major podcast platforms: https://optimal-insights.captivate.fm/listen
The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Optimal Blue, LLC.