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.
Rates Currently Trending: Neutral
Mortgage rates are trending sideways to slightly higher this morning. Last week the MBS market worsened by -2bps. This was not enough to worsen mortgage rates or fees. Rates were very flat throughout the week with increased volatility on Friday.
Today’s Rate Forecast: Neutral
Three Things: These are the three things that have the greatest ability to impact mortgage rates this week: 1) Trade 2) The Fed and 3) Inflation.
1) Trade: Trade talks will continue this week via teleconferencing. The bond market will be looking for more progress if any major milestones are confirmed; it could push rates higher. But if we get more vague outcome “it’s going well” type of commentary then rates will move sideways.
2) Fed: We have a very busy week that will focus on Wednesday’s release of the Minutes from the last FOMC meeting where they seemed to tilt more to the “dovish” side of policy. But we also hear from key members including Vice Chair Clarida and Governor Bowman.
3) Inflation: We will get a few essential readings this week including CPI, PPI, and import prices. But the bond markets will focus on our Headline CPI which has remained at the 1.8% (while Core has been above 2%). Given all of the recent economic data, the markets are not expecting this trend line to change. However, CPI across the pond is more of a wild-card with key readings from China and Germany.
Treasury Dump: We will be dumping our nation’s debt into the markets with three auctions:
- 04/09 3 year note
- 04/10 10 year note
- 04/11 30 year bond
Today’s Potential Rate Volatility: Average
Trade talks and inflation numbers are the two events that have the ability to increase volatility and push rates higher. We’ll be paying particularly close attention to the inflation numbers, specifically the CPI reading. 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.