This Week’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 this morning.  Last week the MBS market worsened by -22bps.  This was enough to move rates slightly higher last week. We saw high rate volatility throughout the week.

This Week’s Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to move mortgage rates this week. 1) Trade War, 2) Domestic and 3) Across the Pond

1) Trade War: The U.S./China trade war continues to be the primary focus of bond traders as we continue to approach the September 1st deadline for the new round of 10% tariffs on $300B worth of Chinese goods. Last week focused on the Dollar/Yuan relationship, and that will continue to be in the spotlight. The Geopolitical situation in Hong Kong is also in focus.

2) Domestic: Last week got PPI, and this week we get the more important CPI as a measure of the consumer side of inflation. We also get a critical retail sales report.

3) Across the Pond: Germany (basically the only economic engine in the Eurozone), will release a very important GDP report that will get a lot of attention, particularly after Great Britain showed a negative GDP on a MOM basis last week. From China, we get retail sales and industrial production.

Central Bank Palooza: Norway and Mexico will have Central Bank meetings on Thursday.

This Week’s Potential Volatility: High

Wild times for markets and rates over the last couple of weeks. This week we could see the same kind of volatility as we saw last week. There’s nothing on the economic front that can cause volatility until Thursday. However, the trade war and Hong Kong could inject rate volatility into the markets at any time.

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.