Weekly Mortgage Rate Update (December 19th, 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: Lower

Mortgage rates are trending slightly lower this morning.  Last week the MBS market worsened by -88bps.  This was enough to worsen mortgage rates or fees. Mortgage rates were very volatile last week.

This Week's Rate Forecast: Neutral

These are the Three Things that have the greatest ability to impact mortgage rates this week: 1) Central Bank, 2) Domestic Data and 3) Parking Lot.

1) Central Bank. We start the week off with our own Janet Yellen speaking at 1:30EST. Will she walk back expectations of 3 rate hikes in 2017 or double down on it? On Tuesday, we have the Bank of Japan’s interest rate decision and policy statement. Any action from the world’s number 3 economy could have an mortgage rates Tuesday.

2) Domestic Data. We really don’t have any major data until Thursday and then we get a glut of it. We will get our 3rd QTR GDP but this will be yet another revision and the third time we have seen this data. We will also get our Durable Goods, Personal Income and Spending and PCE.

3) Parking Lot. Just like every major road leading to a mall, its a parking lot out there. The stock market has been on a tear as of late, setting new highs and records. And many traders will be looking to book those profits by the end of the year to make their performance look better and increase their bonuses. As a result, it will at the least provide a nice temporary bottom for MBS and at the most, may even help mortgage rates a tad as they “park” their funds.

Geo-Political. We had a nice (and fleeting) spike in intra-day trading on Friday on the saber-rattling over China snatching our property (a naval drone). This situation is still ongoing and may provide some momentum. But it is a reminder that even though we are having a boring session, there is always the potential for volatility that is not scheduled or expected.

This Week's Potential Volatility: Average

We’re not expecting a lot of volatility this week due to the fact we have a sparse economic calendar until Thursday, but as noted above unexpected events can happen.

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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