This week’s Mortgage Market Update is relatively calm, with rate changes likely to remain neutral and volatility to stay within the average range. But before we dive into the current mortgage market trends, let’s review how and why mortgage rates move.

How Rates Move Within The Market

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. This means rates or loan fees (mortgage pricing) doesn’t stay fixed; it moves throughout the day. Mortgage pricing movements are affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates typically fall. When MBS pricing drops, mortgage rates often increase.

Tracking these securities in real-time is critical for the most accurate pricing information. For more information about the rate market, contact my team directly. We are among the few mortgage professionals who have access to live trading screens during market hours.

Now, let’s take a look at how mortgage rates are looking in the current market.

Rates Currently Trending: NEUTRAL

Mortgage rates are trending sideways this morning. Last week the MBS market worsened by -62 bps. This moved mortgage rates higher last week. Mortgage rate volatility picked up again last week.

This Week’s Forecast: NEUTRAL

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week. 1) Geopolitical, 2) Central Bank Palooza and 3) Domestic.

1) Geopolitical: Our Government Shutdown is front and center this week. They are expected to try to vote in the Senate today for a stop-gap measure, but currently, the bond market is on hold until something happens.

2) Central Bank Palooza: This week we get the Bank of Japan’s interest rate decision and policy statement. Their reduction in bond purchases (revealed in their balance sheet but not announced as a formal policy, had a negative impact on mortgage rates). Will we see a rate increase and an official taper announcment?

The European Central Bank also will give us their interest rate decision and policy statement. The bond market will pay close attention to the asset purchase plans.

3) Domestic: We get our first look at the 4th QTR GDP on Friday. So far both the 2nd and 3rd QTRS have seen growth at 3% or higher. This first initial release is projected to be at 2.9%. If we get a “3” handle on that reading, it will be very negative for bonds and mortgage rates.

Treasury Auctions this Week:

01/23 – 2 year note
01/24 – 5 year note
01/25 – 7 year note

This Week’s Potential Volatility: AVERAGE

Mortgage rates could see a bit of volatility this week with the government shutdown. If it continues through the week, look for mortgage rates to push a bit lower. However, it is not likely that the slight improvements will last longer term.

The 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 looking for a mortgage professional serving the state of Texas, please reach out to us today for information on home loan programs and receive a free rate quote.