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: Higher
Mortgage rates are trending slightly higher this morning. Last week the MBS market improved by +43 basis points. This was enough to improve mortgage rates or fees. Mortgage rates were relatively volatile yesterday.
This Week’s Rate Forecast: Higher
Three Things: These three things have the greatest ability to impact mortgage rates this week: 1) Geopolitical, 2) Across the Pond and 3) Domestic
1) Geopolitical: God Bless America as we all reflect and remember September 11.
It appears as if (recently downgraded) Tropical Storm Irma has been devastating, but it was not as severe as projected. Still, half of Florida does not have power.
North Korea, did not lob another missile on Saturday. The markets were expecting one to go along with a key celebration over there. It could mean that they had technical difficulties or it could mean that the threat of tougher U.N. sanctions and an oil embargo has had an impact.
2) Across the Pond: We will hear from the Bank of England on Thursday. While the markets do not expect a rate hike at this time, we will be paying close attention to the vote. The market expects a vote of 7-2 (two members wanting to raise rates). If that hits 6-3 or 5-4, then MBS will sell off. We will also get key inflationary data points from China and Germany.
3) Domestic Flavor: We have a very light week for economic data, but we do have two very important reports. They are Wednesday’s CPI and Friday’s Retail Sales. The closer that the Core YOY CPI is to 2.0%, the worse it will be for rates. Retail Sales are expected to see a minimal improvement.
Treasury Auctions This Week:
- 09-11 – 3-year note
- 09-12 – 10-year note
- 09-13 – 30-year bond (most important)
This Week’s Potential Volatility: Average
We could see some mortgage rate volatility as rates move a little higher on the better than expected outcome of Irma and the fact that North Korea didn’t launch any missiles. While we do expect mortgage rates to drift a bit higher today and this week, we don’t expect too high of mortgage rate volatility.
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: