This week’s Mortgage Market Update shows rate staying neutral with average volatility. Read on to see how current economic and political events could alter rate movement in the market next week.
How Rates Move
Conventional government lenders set their rates based on the pricing of Mortgage and G-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) is variable and can move throughout the day. Rates are affected by a variety of economic or political events, so sometimes breaking news will impact mortgage pricing.
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 essential for us so that we may provide the most up-to-date and accurate pricing for our borrowers.
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 improved by +3bps. This was not enough to move rates higher last week. There was low mortgage rate volatility last week.
This Week’s Rate Forecast – NEUTRAL
Three Things: These are the three areas that have the greatest ability to impact your mortgage rates this week. 1) Trade Wars, 2) Oil and 3) Geopolitical.
1.) Trade Wars: Is last week’s opening furrow just the beginning? That is what all markets (stocks, bonds, etc) are concerned about and is a significant uncertainty for traders. While the first round of tariffs by the US and China won’t kick in until July 6th, we will be looking for any movements in trade negotiations.
2.) Oil: A sharp rise in oil prices were a major factor in a multitude of inflation readings over the past month which also pressured rates. But over the past couple of weeks, oil prices have dropped, and it has helped mortgage rates. This Friday we have a critical OPEC meeting, and their output targets will impact inflation expectations.
3.) Geopolitical: Merkel is on the chopping block in Germany which is very big for the markets. Spain and Italy are still of concern with their very recent leadership change and their large debt.
Housing Data: While these reports do not generally impact your mortgage rates, we do get a ton of housing-related data this week that will give us a good understanding of the state of the housing market.
This week we get the Home Builders’ Sentiment Index, Housing Starts, Building Permits, Weekly Mortgage Applications, Existing Home Sales and the FHFA Home Price Index.
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