Mortgage rates are never constant, and even if they remain fairly consistent, a variety of economic factors can sway them. In this week’s mortgage market update we look at how rates are currently trending, what could influence their movement in the near future and how volatile the changes may be. But first, let’s review how mortgage rates move within the market.

Mortgage Rate Movement, Explained

How do mortgage lenders set their interest rates? And why do they change?

The answer lies in Mortgage Backed Securities (MBS), which are securities that are traded in real time, all day in the bond market. Conventional and Government (FHA, USDA and VA) lenders base their rates on MBS pricing. Therefore, mortgage pricing (which includes rates and loan fees) often moves throughout the day, being affected by a variety of economic or political events.

When MBS pricing is on the rise, mortgage rates generally go down. Likewise, when MBS pricing falls, rates usually go up. Since rates are so changeable, the ability to track their movement in real time is critical for ensuring fair and accurate pricing in the market. For more information about today’s mortgage rates, contact us directly. We are among the few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending slightly higher so far today.  Last week the MBS market improved by +5bps.  This caused rates and fees to remain mostly unchanged. We saw moderate rate volatility throughout most of the week.

This Week’s Rate Forecast: Neutral

Three Things: These are the three areas that can move rates this week.

  • Trade Wars
  • Geopolitical
  • Domestic

1) Trade Wars: It is expected that the U.S. and China will sign the Phase 1 trade deal on Wednesday. At that point, the markets should have all of the final details of exactly what is in (and what is not in) the trade deal.

2) Geopolitical: Brexit is very much on the bond market’s mind as the January 31st deadline is fast approaching. While the Brexit deal has made it out of the lower chamber, Monday kicks off with the House of Lords beginning debates on Brexit Withdrawal Agreement Bill. On the Iranian front, military escalation seems to have abated, but that could turn on a dime, and bonds will continue to be very reactive to any action(s).

3) Domestic: Retail Sales and CPI will get the most attention. The stronger these reports are, the worse it will be for pricing.

The Fed: Here is the Fed’s schedule this week:

  • 01/13 Eric Rosengren, Raphel Bostic
  • 01/14 John Williams, Esther George
  • 01/15 Patrick Harker, Robert Kaplan, Fed’s Beige Book
  • 01/16 Michelle Bowman, Fed’s Balance Sheet
  • 01/17 Randal Quarles

This Week’s Potential Volatility: Average

We have some domestic economic data this week that can move rates and spike volatility. For rates to move significantly lower, it will take something unforeseen on the geopolitical front, mainly from Iran. Short of something unexpected, look for rates to trial slightly higher on moderate 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. If you’re searching for competitive rates on Texas home loans, please browse our selection of mortgage products and reach out to us for a free, no-obligation rate quote.