In this week’s Mortgage Market Update, we’ll look at current trends in mortgage rates and what economic factors may contribute to the fluctuations in the market. Read on for details…

Mortgage Market Update – July 24, 2017

Before we get into the details of this week’s mortgage rate activity, let’s give a little refresher on how rates move.

Conventional and government (FHA, VA, USDA) 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. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities in real time is critical.

For more information about the rate market, contact us 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 rates are currently trending.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning. Last week the MBS market improved by +45bps. This was enough to improve mortgage rates or fees. Last week volatility was relatively low.

This Week’s Rate Forecast: Neutral

Three Things: These are the three items that have the greatest ability to impact mortgage rates this week: 1.) Fed, 2.) Domestic and 3.) Across the Pond.

1.) Fed: Tuesday starts two days of Fed meetings that will culminate in a vote and the release of their interest rate decision and policy statement Wednesday at 2 pm PDT. The bond market is not even pricing a 50% chance that the Fed will raise rates again this year even though the Fed has communicated (via dot plot chart forecasts and speeches) that it will increase one more time this year. Regardless, the market does not expect it to do so at this meeting. The main reason (other than no inflation and slow growth) is that this is not one of their meetings where they have a live press conference afterward with Janet Yellen, and their economic forecasts will not be released at this meeting. So, with little chance of a rate hike, we are focused on learning more about the timing of the Fed starting to taper (purchase less) of MBS and Treasuries which they have said will start this year. Will they announce a start date at this meeting? That’s what the markets want to know.

2.) Domestic: We get a lot of housing news this week (Existing Home Sales, Case Shiller, Mortgage Applications and New Home Sales) but it will be Friday’s first release of the 2nd QTR GDP that will carry the most weight for mortgage rates. The consensus estimates call for a very strong 2.8% growth rate. Generally, any reading above 2.5% is negative for long bonds but not in this case as the market is not convinced our economy can grow at a reasonable rate unless we get Tax and Regulatory reform.

3.) Across the Pond: Monday’s meeting between all the Oil Ministers will get a lot of attention. While no real action is expected, their recommendations that they issue for the next OPEC meeting will carry a lot of weight. As WTI Oil marches towards $50, it is negative for pricing (higher rates) as it is deflationary. We also get key economic data from the world’s largest economies such as Japan’s Retail Sales, Unemployment Rate and Nikkei Manufacturing and Great Britain’s GDP.

Treasury Auctions This Week:

  • 07/25 2 year note
  • 07/26 5 year note
  • 07/27 7 year note

This Week’s Potential Volatility: Average

We’re looking for mortgage rates to trade in a relatively tight range until Wednesday. The Fed releases their policy statement on Wednesday, and this could cause some mortgage rate volatility. Of course, the release of the 2nd quarter GDP on Friday could move markets as well.

Bottom Line:

If you’re trying to weigh the risks and benefits of locking your interest rate today or floating your loan rate, contact your mortgage professional to discuss it with them. If you’re searching for a mortgage in the state of Texas, please give us a call at (972) 591-3097 or complete the form on this page and we will reach out to you after reviewing your information.