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: Lower
Mortgage rates are trending slightly lower this morning. Last week the MBS market worsened by -7bps. This was probably not enough to worsen mortgage rates or fees. Mortgage rates were fairly volatile last week and we’re looking for more of the same this week.
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) Fed, 2) Domestic and 3) Geopolitical.
1) Fed: We actually may have a more robust schedule this week than last. The only difference is that there is not an official policy release.
- 09/25 William Dudley, Charles Evans and Neel Kashkari
- 09/26 Janet Yellen, Charles Evans, Loretta Mester and Raphael Bostic
- 09/27 James Bullard and Eric Rosengren
- 09/28 Esther George and Stanley Fischer
- 09/29 Patrick Harker
The bond market will be paying close attention to these speeches, the more “hawkish” tone that key members have, the worse it is for bond prices.
2) Domestic: It has been awhile since this category has been in the top two. But this is a very robust week for economic data. Bond traders will be paying very close attention to the 3rd release (2nd revision) of the 2nd QTR GDP which came in at 3.0% last time around. We also get an important inflationary reading with Core PCE YOY. Manufacturing will get a lot of attention with the Chicago PMI release, and we will get a good read on the consumer with both Consumer Confidence and Consumer Sentiment.
3) Geopolitical: Two big issues domestically as the Senate attempts to yet again make a run at Obamacare. We will also get a big release of what exactly is being proposed on corporate and personal tax reform.
Across the pond, Germany has re-elected Angela Merkel as their PM. However, she now has at least 4 different political parties in her government that when they are used to only 2. This will dramatically change policy moving forward as the two newer elected groups are more conservative and could have an impact on Brexit talks, ECB Policy and more.
And of course, Kim Jong-un and the potential instability between U.S., China and Japan (number 1, 2 and 3 economic powers) will once again be a huge focus.
Treasury Auctions This Week:
- 09/26 2 year note
- 09/27 5 year note
- 09/28 7 year note
Housing Data This Week: This is always a window into how real estate is doing throughout the country.
- 09/26 Case-Shiller Home Price Index
- 09/27 Weekly Mortgage Applications, Pending Home Sales.
This Week’s Potential Volatility: High
As noted above, this is a big week for economic data and news from Fed officials. This week could be very volatile for mortgage rates, but at the same time we’re not expecting a large sustained move up or down.
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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