Weekly Mortgage Rate Update (October 31st, 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 sideways this morning.  Last week the MBS market worsened by -43bps.  This was enough to worsen mortgage rates or fees.

This Week's Rate Forecast: Neutral

These three things will likely have the most impact on mortgage rates this week. 1) Central Bank, 2) Jobs and 3) Manufacturing/Servicing.

1) Central Bank: We have the BofJ (Bank of Japan) on Tuesday (will we see “helicopter money”?), Our Federal Reserve on Wednesday (will they raise rates now or December?) and the BofE (Bank of England) on Thursday (will we learn more about Carney’s term and will they lower rates given that their economy is actually doing well?).

2) Jobs: We get a glut of jobs/wage data this week including: Personal Income, Unit Labor Costs, ADP Private Payrolls, Challenger Job Cuts, Initial Weekly Jobless Claims, Non Farm Payrolls, Unemployment Rate, Average Hourly wages and more. As usual, the emphasis will be on Friday’s NFP data. The market is expecting 175K but just as important will be the revision to September’s reading of 156K. Average Hour Wages YOY jumped to 2.6% last time around and will also get a lot of attention from bond traders/mortgage rates.

3) Manufacturing and Services: We already got the October Chicago PMI and it was lighter than expected (50.6 vs est 54) but it was still expansionary (meaning that October expanded over and above September’s activity. We still have Factory Orders and ISM Manufacturing this week. But the most important reading of the week is Thursday’s ISM Services reading which accounts for approximately 80% of economic activity (Manufacturing is about 20%).

This Week's Potential Volatility: Average

Mortgage rates should stay relatively calm this week. However, the Fed and Friday’s NFP Report are the two events most likely to cause volatility. The bias continues to be toward slightly higher mortgage rates.

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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