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 lower so far today. Last week the MBS market improved by +39bps. This was enough to move rates lower last week. We saw mostly moderate rate volatility last week.
Today’s Rate Forecast: Neutral
Three Things: These are the three areas that have the highest potential to impact mortgage rates this week. 1) Jobs, 2) Geopolitical and 3) Fed.
1) Jobs: We get a ton of jobs related data this week with the bond market focusing on Friday’s Average Hourly Earnings data. Last month, it broke above 3.0% on a YOY basis with a 3.1% reading. The market is expecting a reading at least as strong as that. If moves higher than 3.2%, it would spark a selloff (higher rates).
2) Geopolitical: This is a TON of big global stories this week, and any one of them could easily push pricing higher or lower. The news over the weekend is the “truce” between China and the U.S. with a 90 day period of tariff freezes while the two groups negotiate a new trade deal. While Brexit is still very much in the news, it is actually France that is stealing the European headlines with massive demonstrations of 100,000 protesting rising taxes and gasoline prices. OPEC is also taking center stage as falling oil prices has been a big factor in keeping inflation at bay in the U.S. Their is an OPEC meeting on Thursday, and already we have one member, Qatar saying that it will officially leave the cartel on January 1.
3) Fed: We have a very big week that is stuffed full of speeches as we near the media blackout period before their December meeting. Fed Chair Powell was originally scheduled to speak on Wednesday, but that has been canceled due to the market being closed on Wed…we are waiting to see when it will be rescheduled for.
12/03 Clarida, Quarles, Williams, Brainard, and Kaplan
12/05 Fed Beige Book, Powell, and Quarles
Today’s Potential Rate Volatility: Average
Mortgage rates have a lot to chew on this week on the geopolitical front. There’s a lot hanging out there that can move rates higher or lower. While we have some economic releases that can drive rates, look for markets to focus on trade, Brexit, and most of all France.
If you are looking for the risks and benefits of locking your interest rate in today, contact your mortgage professional to discuss it with them.