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 -4bps. This was not enough to worsen mortgage rates or fees. Mortgage rates experience high volatility last week .
This Week’s Rate Forecast: Neutral
Three Things: These are the three items that have the greatest ability to impact mortgage rates this week 1) Geopolitical, 2) Oil and 3) Across the Pond
1) Geopolitical: Events will continue to be one of the major driving forces for the direction of morning rates. Fear over China, North Korea and the fate of the Eurozone has kept MBS at very elevated levels. The odds that the rug will be pulled out from under MBS due to a retreat in fear is very small. North Korea just launched another missile and claims they can handle a nuclear payload. Meanwhile, in Europe, the newly elected French President has appointed a new President, and Germany’s Merkel has won a crucial state election on her way to the national election in September. Both will reduce the Eurozone fear a smidge. Any movement in Taxes or Health Care in the U.S. also could play a role.
2) Oil: WTI Oil prices can have a substantial impact on mortgage rates. As they fall, there’s much less threat of inflation, which bonds love. As they move higher, the risk of inflation increases which bonds hate. Right now, both Saudi Arabia and Russia are pushing to extend OPECs “freeze” in production which has stabilized WTI Oil from a free fall two weeks ago. If prices crack back above $50, then MBS could fee a little pressure (higher mortgage rates).
3) Across The Pond: While there are no major U.S. economic releases this week that can impact mortgage rates, there’s plenty to digest from overseas. Great Britain: Retail Sales, PPI, CPI, Unemployment Rate. Eurozone: GDP, CPI, Consumer Confidence. Germany: Economic Sentiment, PPI. Japan: Industrial Production, GDP.
This Week’s Potential Volatility: Average
We have a very light domestic economic schedule this week that lacks any big name releases that have the gravitas to impact mortgage rates. For the past four weeks, our weekly change has been -25, -2, -13, -4 respectively…very little mortgage rate movement. The good news though is that geopolitical fear has kept the MBS at elevated levels (low mortgage rates). Look for MBS to be in the same relative range that we’ve seen unless something from overseas implodes (stable mortgage rates).
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: