green illustration of houseIn this week’s Mortgage Market Update, we see rates trending higher while political and economic issues take center stage.

Before we look at the forecast, let’s briefly review how mortgage rates move.

Conventional and government lenders determine 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. Generally speaking, when MBS pricing goes up, mortgage rates go down. When MBS pricing drops, rates typically go up. Tracking these securities real-time is very important for mortgage professionals as it allows them to more effectively communicate mortgage rate trends to potential borrowers.

For more information about the rate market, contact me or someone from my team directly. I’m among few mortgage professionals who have access to live trading screens during market hours.

Mortgage Rate Summary

Rates Currently Trending: HIGHER

Mortgage rates are trending higher this morning. Last week the MBS market improved by +22bps. This may’ve moved mortgage rates slightly lower last week. Mortgage rate volatility picked up a bit last week.

This Week’s Rate Forecast: HIGHER

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week. 1) Trade Wars, 2) Jobs and 3) Fed

1) Trade Wars: The looming “threat” of an escalating trade war has provided a bottom for MBS for the past 6 weeks. While a rebalancing of trade practices is certainly required, it can bring with it volatility and uncertainty at the least and at the worst, slow down our economy. The world’s second-largest economy, China, is being closely watched. They announced that they would push back against the U.S. (that wants them to stop stealing intellectual property developed and created in the U.S.). They had previously announced 128 products last week, and now we have more details as they have split those 128 products into seven groups and including U.S. pork, recycled aluminum, steel pipes, fruit, and wine. The Chinese ministry will implement measures in two stages: first, a 15% tariff on 120 products including steel pipes, dried fruit and wine, and later, a 25% tariff on pork and recycled aluminum. NAFTA is also getting attention as President Trump once again has threatened to end the archaic agreement unless a new agreement is reached soon. As of now, this is not a major threat to our economy, but further rhetoric/escalation or even a de-escalation can cause MBS to have some volatility.

2) Jobs: We get a ton of jobs data this week culminating with Friday’s big data dump where we will get the unemployment rate, non-farm payrolls, and wages. The bond market will be focused on average hourly wages as the YOY number is projected to hit 2.7%, the closer that number is to 3.00% – the worse it will be for rates. If it falls below 2.5%, then it will be great for rates.

3) Fed: On Wednesday we will get the Minutes from the last FOMC meeting where they raised interest rates for the first time this year.

This Week’s Potential Volatility: AVERAGE

Mortgage rate volatility picked up a bit last week. Mortgage rates could see volatility again this week, particularly as we get jobs data throughout the week. Of course, anything unexpected geopolitically could move rates as well.

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. If you’re searching for home financing in the state of Texas, please reach out to The Decker Group at (972) 591-3097. We’re happy to provide information and a free rate quote just for getting in touch!

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