This Week’s Mortgage Rate Update

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 improved by +47bps.  This was enough to move rates lower last week. We saw high rate volatility last week.

This Week’s Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week: 1 through 3 – China.

1, 2, and 3: Trade War with China. The U.S. announced last week that we would impose a 10% tariff on the remaining $300B worth of Chinese imports that were not already under some form of tariffs. This was after dismal face-to-face negotiations in China that week. In response, China has announced that they will suspend agricultural imports from the U.S. (instead of buying more, which they had previously promised and never delivered) and have significantly devalued their currency (officially the PBOC says they didn’t do it and its a mystery to them).

Treasury Auctions this Week:

  • 08/06 3 year note

  • 08/07 10 year note

  • 08/08 30 year bond

The Fed:

  • 08/05 Lael Brainard

  • 08/06 James Bullard

  • 08/07 Charles Evans

This Week’s Potential Volatility: High

Market and rate volatility has skyrocketed recently. This is almost entirely due to the recent escalation in the trade war with China. As denoted above, rate markets will be paying particularly close attention to the trade war with China. Look for volatility to remain high through the week.

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.