Hawaii Mortgage Market Update – September 2026

Each month, we bring you insights from one of the best in the business — Zack Diener of Barrett Financial Group, LLC — to help you stay informed and make confident, well-timed decisions in today’s ever-changing mortgage landscape.

The Fed Finally Did It: First Rate Hike Since 2023

Well, it happened. After months of hints, debate, and dot-plot drama, the Fed raised rates on September 16th – the first hike since July 2023. The federal funds rate now sits at 3.75-4.00%, up a quarter point. Mortgage rates responded predictably: we’re now solidly above 7% for the first time since March, with most surveys showing 30-year rates in the 7.0-7.4% range.

Why the Fed Pulled the Trigger

Two things forced their hand: sticky inflation and a labor market that refused to fully break. August CPI came in at 3.4% year-over-year – unchanged from July and still well above the Fed’s 2% target. Gas prices, still elevated from the ongoing Iran conflict, were up 27.4% year-over-year and the single biggest driver of the monthly increase.

Meanwhile, the jobs picture that had looked shaky all summer suddenly firmed up. August payrolls came in at 162,000 – a big beat that erased talk of imminent Fed cuts and instead opened the door to a hike.

New Fed Chair Kevin Warsh, in just his third meeting, didn’t hesitate. The vote was unanimous, 12-0. His message was blunt: “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Today, the FOMC decided that this standard has not been satisfied.”

More Hikes Possible

This likely isn’t a one-and-done move. The Fed’s updated projections show 16 of 18 members expecting at least one more hike before year-end, with some pushing for two. That said, most economists don’t think we’re entering an extended hiking cycle – just enough tightening to get inflation moving in the right direction.

Markets are now pricing in real odds of another hike at the October or December meeting.

Big Changes Coming to Appraisals Too

Rates aren’t the only thing shifting this fall. On November 2nd, the entire conventional appraisal industry moves to a new standard called UAD 3.6 – the biggest overhaul to appraisal reporting in over a decade, and it lands right in the middle of your fall and winter closings.

What’s Actually Changing:

Fannie Mae and Freddie Mac are retiring all the old, familiar appraisal forms – the 1004, 1073, 1025, 2055, and every condo/co-op/manufactured-home variant – and replacing them with a single, dynamic Uniform Residential Appraisal Report (URAR). Instead of an appraiser picking a rigid form to fit the property, the new report automatically expands or contracts based on what type of home it is and what the loan requires.

Importantly: this doesn’t change how homes are valued. A licensed appraiser is still using the same professional judgment and approach. What’s changing is how the data gets collected, organized, and delivered – moving from a narrative-heavy format to a much more structured, data-driven one.

This Is a Conventional Loan Thing – For Now:

Here’s the piece I want to be really clear on: the November 2nd deadline applies specifically to conventional loans sold to Fannie Mae and Freddie Mac. It does not currently apply to FHA or VA loans.

• FHA has opened optional UAD 3.6 submission but hasn’t set a mandatory date yet. Legacy reports are still being accepted.
• VA hasn’t announced an adoption timeline at all. VA appraisals run through their own separate system anyway, not the GSE portal this mandate governs.
• USDA is in the same boat as VA – no announced timeline yet.

Practically, this means if you’re buying with an FHA or VA loan this fall, your appraisal experience likely won’t change on November 2nd the way a conventional buyer’s will. For a while, we may actually see conventional and government-loan appraisals on similar properties look noticeably different from each other, simply because they’re running on different systems. If you’re using an FHA, VA, or USDA loan, it’s worth confirming with your lender which standard applies to your file – but don’t assume the conventional deadline automatically applies to you.

What This Means for Buyers and Sellers (Conventional Loans):

• Possibly more time at the property. Because the new format collects more granular data (including things like energy-efficiency details), appraisers may spend a bit longer during their site visit, especially early in the transition.
• More complete info needed upfront. Lenders will need to provide more complete property and assignment details when ordering the appraisal, so it’s worth making sure your listing details and property info are accurate and complete before the appraisal is ordered.
• Timing matters for contracts closing near November 2nd. The mandate is based on when the appraisal is submitted to the government’s data portal – not your contract date or the appraisal’s effective date. If you have a conventional deal in the pipeline that straddles early November, ask your lender which format your appraisal will use so there are no surprises.
• No impact on value, in theory. The methodology appraisers use to determine value doesn’t change. This is a reporting and data overhaul, not a new way of judging what a home is worth.

The Bigger Picture:

The industry has been transitioning gradually since broad production opened back in January, so most active appraisers and lenders (myself included) have had months to prepare. Think of November 2nd as the finish line for conventional loans, not the starting gun for the whole industry. If your agent or lender seems on top of it, you likely won’t notice much difference beyond maybe a slightly different-looking report – and if you’re in an FHA or VA loan, this change probably won’t touch your transaction at all for now.

What This Means for Borrowers

The New Rate Reality:

Rates above 7% are a meaningful shift from the sub-6% levels we saw briefly back in April. On a $500,000 loan, that’s roughly $300+/month more than the April lows.

Don’t Expect Relief Soon:

With the Fed actively hiking rather than contemplating cuts, the rate-relief conversation is essentially dead for the rest of 2026. Fannie Mae and the MBA (Mortgage Bankers Association) both see rates holding in the high 6% to low 7% range through year-end.

Refinance Math Still Works for Some:

If your current rate is 8%+ from the 2023 peak, today’s 7% still represents savings. But the refinance case that looked compelling back in April (rates in the 5s and 6s) is largely off the table for now.

Bottom Line:

The Fed just confirmed what the bond market had been signaling for weeks – inflation isn’t cooperating, and they’re willing to act on it. Add in a once-in-a-decade appraisal system overhaul landing right in the middle of fall closings for conventional buyers, and there’s a lot for buyers, sellers, and their agents to stay on top of this quarter. If you’re buying or refinancing, treat 7%+ rates as the current reality rather than a temporary spike to wait out, and loop in your lender early if your closing date is anywhere near November 2nd.

Mortgage insights provided by
Zack Diener  – Mortgage Broker
Barrett Financial Group LLC NMLS 470413 / 181106
808-349-3777
Zdiener@barrettfinancial.com
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