In today’s Mortgage Market Update, we’ll look at how COVID-19 has affected economic systems, the housing market and the mortgage industry. Before we dive in, let’s take a quick refresher on how mortgage rates fluctuate within the market.
How Rates Move:
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. Rates or loan fees (mortgage pricing) usually do not remain stagnant. They move 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. The ability to track these changes in real-time is critical, and can set certain lenders apart.
For more information about the rate market, contact us today. We are among the few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Lower
Mortgage rates are trending slightly lower so far today. Last week the MBS market worsened by -40bps. This may’ve been enough to move rates very slightly higher for the week. We saw high rate volatility at the end of the week.
This Week’s Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Fed, 2) Trade War, and 3) Coronavirus.
1) Fed: The Federal Reserve Open Market Committee (FOMC) will conclude two days of virtual meetings on Wednesday with their latest Interest Rate Decision and Policy Statement. They were also supposed to release their Economic Projections (dot plot chart), but that appears to be on hold. We will also have a live virtual press conference with Fed Chair Powell that afternoon. MBS traders will be looking for more information on their “taper” of MBS and Treasury purchases.
2) Trade War: The growing rhetoric and “war of words” between the US and China continue to drive concern over the implementation of Phase I as well as many other trade/military/economic concerns.
3) Coronavirus: The pandemic and the impact on our economy continues to be a major factor in long bond prices, even though it appears that the stock markets have moved passed the issue. Here are some key developments to start our week.
- New York City begins lifting some lockdown restrictions today, which is exactly 100 days since their first confirmed Covid-19 case
- New Zealand declares itself “Coronavirus free” and lifts all restrictions except for border controls.
- Global Cases continue to rise and now top 7 million.
- US Bankruptcies soar 48% in May, the most since the last financial crisis
Treasury Dump: Here is this week’s Treasury auction schedule.
- 06/09 10 year note
- 06/11 30 year bond
This Week’s Potential Volatility: Average
Last week we saw rate volatility spike for the first time in a long time. Last week we had a lot of economic data, including stronger than expected jobs numbers. However, this week will take something unexpected to increase volatility in one of the three above categories.
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 are searching for an affordable mortgage in the state of Texas, please reach out to us to explore our offerings. We are happy to offer a free, no-obligation consultation to help you find the best loan product for your scenario.