Today’s Mortgage Rate Summary

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 again this morning.  Last week the MBS market worsened by -19bps.  This was enough to move rates or fees slightly higher last week. We saw relatively low rate volatility all week.

Today’s Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to mortgage rates this week. 1) Central Bank, 2) Geopolitical and 3) Domestic Flavor.

1) Central Bank: Will we get another rate hike this year and what are the Fed projections for the next couple of years? Those are the major questions that the bond market has. On Wednesday at 2 pm ET, we’ll get the latest Fed interest rate decision and policy statement. The market expectations are that the Fed will still raise rates by a 1/4 point, but those expectations have pulled back from 90% 30 days ago, down to 60% now. There are several key moments that could cause MBS to trade in very different directions. First is the rate hike (if it happens) along with their guidance. But then right afterward, we’ll have analyzed their “dot plot” chart which will give us their expectations for future rate hikes. The market expects that the number of rate hikes in 2019 will be reduced but will it show 1,2 or 3? Next up will be the live press conference with Fed Chair Powell, and his answer to live questions could also cause some volatility. But our Fed is not the only game in town this week as we will have important Rate and Policy announcements by the Bank of Japan and the Bank of England.

2) Geopolitical: The big 4 are still sucking up all of the oxygen in the room as the market continues to hedge towards safety in regards to Bexit, France and Italy (and the impact on the ability for the Eurozone to remain intact) and rounding it all out are the two most massive economic (and militarily) forces on earth – U.S. and China trade negotiations. Meanwhile, China will hold its 3-day economic policy-setting meeting where Chinese policymakers will have the occasion to reaffirm their commitment to reform and their measured easing approach while potentially unveiling more fiscal stimulus.

3) Domestic: We get a lot of housing news this week but none of that will impact rates. We will get the 3rd release of the 3rd QTR GDP but that is tired and old data at this point. The market will focus on Friday’s fresh print of PCE as the Fed’s main gauge of inflation.

Today’s Potential Rate Volatility: Average

Mortgage rates will be paying particularly close attention to Wednesday’s rate decision and commentary from the Fed. Assuming the Fed increases rates, which is what the market is expecting, we’ll be paying very close attention to the dot plot chart to determine how many times the Fed expects to increase rates next year. Short of an unexpected geopolitical event, Wednesday’s Fed meeting is what will most likely push rates higher or lower.

Bottom Line:

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.