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 this morning.  Last week the MBS market worsened by -14bps.  This may've moved mortgage rates slightly higher last week. Mortgage rate volatility has really picked up the last few days.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week. 1) Jobs, 2) Geopolitical and 3) Across the Pond 1) Jobs: We have a slew of wage and jobs related data this week with the market focus primarily on Friday's Non-Farm Payrolls and Average Hourly Wages YOY. The stronger these data points are, the worse it is for mortgage rates, the weaker this data is - the better it will be for rates.

• 12/05 - ISM Services - Employment Index
• 12/06 - ADP Private Payrolls, Unit Labor Costs
• 12/07 - Challenger Grey Job Cuts, Initial Jobless Claims
• 12/08 - Non-Farm Payrolls, Unemployment Rate, Participation Rate, Average Hourly Wages.

2) Geopolitical: There will be plenty of drama this week. Now that the Senate has passed their form of the Tax Bill, it must be reconciled with the House version. The final Bill that emerges out of that process could be different than what the markets expect. For example, the corporate tax rate could end up being 22 or 23 percent instead of the 20% rate passed by the Senate. The final Bill that is put forth for the President's signature will drive markets. Of course, the Michael Flynn/FBI vs Trump saga will get plenty of press and attention by the markets as well. 3) Across the Pond: We have an important week for international events that can impact the bond markets and mortgage rates. Both Canada and Australia have Central Bank meetings and interest rate decisions. Brexit is front and center with Great Britain and Ireland already hammering out border agreements, and Prime Minister May will be meeting with key EU leadership on finalizing the financial penalty for their leaving the EU. We also get some significant economic releases from the worlds' largest economies.

• China: Caixin Services PMI, Imports and Exports
• Japan: Consumer Confidence, GDP
• Eurozone: PPI, Retail Sales, Non-Monetary Policy ECB Meeting

This Week's Potential Volatility: High

As noted above, mortgage rate volatility has picked up the last few days. We have a lot on the table this week that could push rates out of a relatively tight channel. Expect continued increased mortgage rate volatility.

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.