In this week’s Mortgage Market Update, we’ll look at how rates are currently trending and highlight specific points ahead that could affect rates in the near future. But first, let’s review how mortgage rates move.

Conventional and Government (FHA, USDA 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. Since MBS are traded all day, their pricing can move up and down throughout the market’s hours. As MBS pricing fluctuates, mortgage rates or loan fees (mortgage pricing) moves throughout the day as well. Rates can also be affected by a variety of economic or political events.

Put simply, when MBS pricing goes up, mortgage pricing generally goes down. When MBS pricing falls, mortgage pricing typically 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.

Mortgage Market Update

Rates Currently Trending – NEUTRAL

Mortgage rates are trending sideways higher this so far today. Last week the MBS market worsened by -102 bps. This moved mortgage rates higher last week. Mortgage rate volatility was high 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) Government Shutdown 2) Fed and 3) Across the Pond.

1) Government Shutdown: Here we go, another deadline this week for a Government shutdown. Will we get yet another emergency measure to “kick the can” for another two weeks? Or with the two sides so far apart will we finally get the promised shutdown? Or will there be a miracle and both sides will come to a long-term agreement?

2) Fed: Yellen is gone. Today, Jerome Powell will officially be sworn in as our Fed Chair, and the new reign will begin. The bond market views him as a little more pragmatic than uber-dove Yellen. We are waiting to see who the new Vice Chair will be. Here is a list of speeches this week:

02/05 – Jerome Powell
02/06 – James Bullard
02/07 – William Dudely, Charles Evans, John Williams
02/08 – Robert Kaplan, Neel Kashkari
02/09 – Esther George

3) Across the Pond: The spotlight will be on the Bank of England’s Central Bank meeting on Thursday. We will also hear from key BofJ and ECB representatives. There will also be some movement in the Brexit situation and key reports out of China.

Treasury Auctions this Week:

02/06 – 3 year note
02/07 – 10 year note
02/08 – 30 year bond

This Week’s Potential Volatility – HIGH

The manufacturing numbers are helping to push mortgage rates a bit higher today. The one thing that can help keep a lid on mortgage rates is the potential of a government shutdown. If that somehow gets resolved quickly, we could see mortgage rates push higher with increased volatility this week.

The Bottom Line for Home Buyers

As always, the bottom line here is to discuss your rate strategy with your mortgage professional. If you are looking for a mortgage lender serving the state of Texas, please contact myself or someone from my team. We would be happy to help you find the best home financing program for your needs and budget. Explore our line of mortgage products to get to know our offerings, then simply connect with us by filling out the form on this page or call us at (972) 591-3097.