mortgage real estate chart

This week’s Mortgage Market Update covers three major areas that have the biggest impact on rates, predictions on how rates will move in the coming week, and insight into the current trend. Before we review this week’s rates, here’s a quick reminder of how mortgage rates move:

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 slightly lower so far today. Last week the MBS market worsened by -2bps. This wasn’t enough to move mortgage rates. Mortgage rate volatility was relatively low 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) Fed, 2) Domestic and 3) Across the Pond.

1) Fed: Fed Chair Jerome Powell will give his first live testimony in the semi-annual monetary policy hearing in front of the House Financial Services Committee on Tuesday and in front of the Senate Banking Committee on Thursday. We already have the Monetary Policy Report that will be used in this meeting. As a result, the bond market will focus on his response to the live questions.

2) Domestic: After last week’s void of economic data, we get a lot of big name reports that certainly have the gravitas to move mortgage rates this week. PCE (the Fed’s key measure of inflation) will take center stage, but there are many other reports that get a lot of attention. We get the first revision to the 4th QTR GDP, Chicago PMI, ISM Manufacturing, Consumer Confidence, Consumer Sentiment and Durable Goods.

3) Across the Pond: China is back after a long Chinese New Year celebration, and we will get their PMI data, and out of Japan, we get their manufacturing and Unemployment data. But it’s Europe that is in the spotlight as we get the “Road to Brexit” speech from Great Britain that was delayed from last week and it supposed to give markets more understanding of the timing and structure.

This Week’s Potential Volatility: HIGH

Last week there wasn’t much on the docket that was likely to move mortgage rates. This week is a different story. As denoted above, there’s a lot of domestic data that has the ability to push us out of our new mortgage rate channel with a good deal of volatility.

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.