In this week’s Mortgage Market Update, we’ll take a look at how mortgage rates are currently trending, where they’re likely to move, and how stable they may be in the coming days ahead. First, let’s review how mortgage rates move.

Mortgage Rate Movement – How it Works

Mortgage rates don’t remain steady, typically. Instead, they have the ability to increase or decrease, depending on several factors. 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.

Generally speaking, mortgage rates or pricing goes down whenever MBS pricing goes up. When MBS pricing falls, rates usually go up. Tracking these securities real-time is very important. For more information about the rate market, contact me or my team directly. I’m among the few mortgage professionals who have access to live trading screens during market hours.

Now for this week’s Mortgage Market Update. Keep in mind, these predictions are subject to change and are based on timely market and economic information. By the time you’re reading this post, the information may have changed. Speak with your mortgage professional for the most accurate and up-to-date information.

Rates Currently Trending: NEUTRAL

Mortgage rates are trending sideways today. Last week the MBS market worsened by -5bps. This caused mortgage rates to move sideways. Mortgage rates continue to move sideways with relatively low volatility. 

This Week’s Rate Forecast: NEUTRAL

Three Things: These three areas have the greatest ability to impact mortgage rates this week. 1) Tax reform, 2) Government shutdown and 3) Domestic.

1) Tax reform: The reconciled tax till has been finalized. It will be voted on by the House on Tuesday and then to the Senate on Wednesday or Thursday. It is still a very close call in the Senate as McCain is back in AZ and will not vote at all on the bill. But offsetting that is Lee and Cochran that will vote for it. Still, there are still a few Republican Senators that are “on the bubble” and have not confirmed that they will support the Bill.

2) Government shutdown: The can was kicked all the way to Friday and the push is on to get more permanent funding through. This may be more difficult than the Tax Bill as there needs to be bipartisan support to get longer-term funding through. The Democrats are using this as their one opportunity to leverage some of their key issues that are not budget/economic related and are folding them into negotiations.

3) Domestic: The most important report of the week is Friday’s Core YOY PCE reading as the “official” inflation rate. Thursday’s revision to the 3rd QTR GDP (3.3%) will also get a lot of attention.

Taking it to the House: This week has a lot of key housing-related reports. They do not impact your mortgage rates but are always important to watch.

  • 12/18 NAHB Housing Market Index
  • 12/19 New Housing Starts and Building Permits
  • 12/20 Existing Home Sales
  • 12/21 FHFA Home Price Index
  • 12/22 New Home Sales

Brexit: The uncertainty of PM May to get anything done or to even get a good deal has certainly helped bonds globally. There are several key meetings this week that the markets will closely watch.

China: Their annual Central Economic Work Conference starts Monday and continues into Wednesday.

Japan: The Bank of Japan monetary policy meeting followed by Governor Kuroda’s press conference.

This Week’s Potential Volatility: AVERAGE

Mortgage rates are likely to continue to move sideways this week.  Something rather unexpected would need to happen to push mortgage rate lower and out if it’s very defined channel.

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.