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

Sigma Research said that said rates are trending essentially unchanged this morning.  Last week the MBS market improved by+35 bps.  This was probably enough to affect rates or  fees.  The market was relatively calm last week.

This Week’s Rate Forecast: Neutral

According to Sigma Research Interest rates continuing a moderate decline this morning; this morning the market is reacting to China’s continuing stock market declines. Down 8.5% today; the sharpest daily percentage decline since 2007. Concerns that China’s authorities may be backing away from supporting the equity markets. Officials haven’t said they would stop buying stocks to prop up the markets, but there is increasing fear that officials may want to test the strength of the markets without intervening as the government has been doing recently. June durable goods orders at 8:30 this morning; better than estimates. Orders were expected to increase 3.1% after declining 2.1% in May, as reported up 3.4%. Excluding the volatile transportation orders up 0.8% after dropping 0.1% in May (it was the biggest increase since last August). The increase in orders was only the second time this year there was improvement. Economic bulls seeing the increase as ‘evidence’ factories are beginning to show growth after slowing substantially earlier this year. This is helping to damper the move up in the MBS market (lower rates) after China’s weakness. Unlike last week, we some market moving news coming out this week. FOMC always important but this one in our view even more so. Since the last meeting there has been a huge decline in almost all commodity prices, from metals to industrial commodities to grain prices. Of course the group will have to paint its best picture about the US economic outlook with declining global equity markets while sweeping the inflation decline under the rug. The Fed is about as confused about what to do than any time in the last two years. They want to raise rates but fear the repercussions that might develop if they do make the move this year.

This Week’s Potential Volatility: Moderate

According to Sigma Research the risk for volatility is high today and this week.  As stated above, the market is heading into a three day weekend and because of that the market is libel to be a little more volatile.  However, it’s hard to imagine the market can get any crazier than last week.

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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