How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways to slightly higher so far today.  Last week the MBS market improved by +18 bps.  This may've moved mortgage rates slightly lower last week.  Mortgage rates continue to trade in a very tight range.

This Week's Rate Forecast: Neutral

Three Things: These three areas have the greatest ability to impact mortgage rates this week: 1) Fed 2) Tax Reform and 3) Domestic. 1) Fed: Our Federal Reserve Open Market Committee (FOMC) begins two days of meetings on Tuesday and will culminate Wednesday afternoon with their policy statement and interest rate decision. But they will also release their revised economic projections (famous dot-plot chart) and will be followed up with a live press conference with Janet Yellen. While all markets widely expect a 1/4 point rate hike, the bond markets will be focusing on their future rate hike projections (dot plot chart) to see if the consensus among the Fed is 2 or 4 rate hikes next year. 2) Tax Reform: The bond market continues to put a low-probability on Tax Reform getting done by the end of the year. And if it is done, markets believe many of the most stimulative measures will be watered down to get the bill out of reconciliation. Any announced agreements/changes to the Tax Bill will have a significant impact on mortgage rates. 3) Domestic: We have a big week for economic releases outside of the Fed. Retail Sales will take center stage, and Core CPI (YOY) will get a lot of attention. Treasury Auctions This Week:

• 12/11 3 year Note, 10-year note
• 12/12 30 year Bond

This Week's Potential Volatility: Average

We're not looking for too much rate volatility until potentially Wednesday when the Fed meets. Of course, any news on tax reform, positive or negative, can push mortgage rates around.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.  

YOUR WEEKLY MORTGAGE RATE UPDATE IS PROVIDED BY: