In today’s Mortgage Market Update, we take a look at why rates are remaining neutral — but with high levels of volatility. If you’re shopping for a home loan when the mortgage rate market is volatile, it’s usually a good idea to consider locking in your rate. However, it helps to understand why these trends occur.

How Rates Move:

Conventional overnment (FHA, USDA and VA) lenders set their rates based on the pricing of Mortgageand G-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. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing 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.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning. Last week the MBS market worsened by -3bps. This was not enough to worsen mortgage rates or fees. Mortgage rates moved sideways all week on very low volatility.

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) The Fed, 2) Geopolitical and 3) Domestic.

1) The Fed: The Federal Reserve Open Market Committee (FOMC) will start two days of meetings on Tuesday which will culminate in their latest interest rate decision and policy decision on Wednesday. Starting at this meeting, all FOMC meetings will be followed by a live press conference with Fed Chair Jerome Powell. Whereas in prior year’s, only certain meetings had live press conferences. The markets are widely expecting that the Fed will stand pat on rates this time around as they wait to see how much drag the government shutdown has had on our economy as well as slower economic growth (but still growth) overseas.

2) Geopolitical: Brexit will continue to be in the headlines again this week, with the UK parliament voting on possible next steps on Tuesday. Trade War – Chinese Vice Premier Liu He visits Washington for trade talks on Wednesday, meeting with Treasury Secretary Mnuchin and US Trade Representative Lighthizer.

3) Domestic: For the first time in a long time, we have some economic data that matters. In fact, we have a deluge of big-name economic releases that have the gravitas to move the needle on your rates. We get our first glimpse at the 4th QTR GDP, PCE (The Fed’s key inflation measure), Chicago PMI and ISM Manufacturing, Consumer Confidence and Consumer Sentiment and a ton of Jobs data. While the number of new Non-Farm Payroll adds will likely be at 1/2 of what we saw last time around, the focus is on Average Hourly Wages which is expected to hold at 3.2% which is a very high level.

Treasury Actions this Week:

01/28: 2-year and the 5-year note
01/29: 7 year note.

This Week’s Potential Volatility: High

Mortgage rates and the markets have a lot of economic data to digest this week. Throw in the geopolitical and trade uncertainty, and we have a high probability of some rate volatility. Today, rates are likely to move sideways. Tomorrow we start to get the economic data that can move rates.

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. Looking for home financing in the state of Texas? Connect with one of our team members today to begin exploring your options. We offer a full range of mortgage programs to suit just about every home buyer or homeowner looking to refinance.