Weekly Mortgage Rate Update (November 7th, 2016) Hagerstown, MD Real Estate

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 slightly higher this morning.  Last week the MBS market improved by +15 bps.  This was not enough to improve mortgage rates or fees.  Mortgage rates were very calm all week ahead of Tuesday’s election.

This Week's Rate Forecast: Neutral

Three Things: The following three events have the greatest potential to impact mortgage rates. 1) The Election, 2) The Fed and 3) Foreign Data.

1) The Election: The one good thing about Tuesday’s election is that it will remove an element of uncertainty. Once the bond market knows the path moving forward, it can begin to adjust accordingly. Not only is the Presidency key, but so is the Senate. We could see a lot of initial volatility but then bonds will normalize. Basically, the bond market will be calmer with Clinton as she is more of a “known” but Trump presents a lot of “unknowns” such as a potential Dodd-Frank reform, Obama care reform, tax rates, control over House and Senate, a potential budget for the first time in 10 years, a possible change in the Fed reserve chair, etc. Many of those items also can have a stimulative impact on the economy in the shorter term and will weigh on bonds as result.

2) The Fed: We get a healthy dose of Fed Speak this week and they will be able to know what type of political environment they will be operating under moving forward. We will hear from Charles Evans, Neel Kashkari, John Williams and James Bullard.

3) Foreign Data: We have key releases which include the minutes from the last BofJ meeting, Chinese Imports and Exports as well as PPI and CPI, German Industrial Production, and PPI.

Treasury Auctions this week:

11/08: 3 year note

11/09: 10 year note

11/10: 30 year bond.

This Week's Potential Volatility: High

There’ s likely to be some pressure on rates today, but we’re not expecting a lot of volatility heading into tomorrow’s elections.  Mortgage rates will initially see volatility after the election results, but the markets will rather quickly adjust and volatility will likely return to normal.

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.

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