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 to slightly higher so far today. Last week the MBS market improved by +40bps. This was enough to move rates lower last week. We saw moderate to low rate volatility through most of week.
This Week’s Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Coronavirus, 2) Domestic 3) thanksgiving.
- Coronavirus: The increase or decrease in hospitalizations, cases, and closings will continue to be the major driving force in bond prices as traders digest the magnitude of the economic headwinds. We are seeing some major banks now estimating a negative GDP for the first quarter.
- Domestic: We have a big week for economic data with major releases that have the gravitas to move rates: GDP (revised), PCE (the fed’s inflation “trigger” rate), Weekly Jobless Claims, Durable Goods Orders, and more.
- Thanksgiving: The bond market is officially closed on Thursday in observance of Thanksgiving but will reopen on Friday only to close early at 2:00 pm ET. But most traders will stop working Wednesday at 2:05 (right after the Fed’s Minutes hit) and will not come back until Monday. This means very “thin” volumes on Wednesday afternoon and Friday, which can skew pricing.
This Week’s Potential Volatility: High
Rate volatility could spike this week with the influx of important economic reports denoted above. Of course, the coronavirus continues to be a major factor in the movement of markets and interest rates. The bond market is closed on Thursday and will reopen on Friday for an abbreviated trading day.
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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