This week we’re seeing rates staying neutral with average levels of volatility. However, key economic conditions, such as the ongoing trade war with China, could impact rates in the near future. In today’s Mortgage Market Update, we’ll give you a brief overview of how rates are currently trending, what we expect in the upcoming week’s forecast, and insight into how volatile rate movement may be throughout the week.
First, let’s take a moment to review how mortgage rates move throughout the market.
How Rates Move:
Rates change and fluctuate frequently. 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. Therefore rates (mortgage pricing) move throughout the day as MBS pricing moves also, being affected by a variety of economic or political events.
When MBS pricing increases, mortgage pricing typically goes down. When they fall, mortgage pricing increases. 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 to slightly higher this morning. Last week the MBS market improved by +20bps. This may’ve been enough to move rates or fees slightly lower last week. We saw moderate rate volatility throughout the week.
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) Fed, 2) Trade War and 3) Geopolitical.
1) Fed: We are fast approaching the June FOMC meeting, and the bond market will be focused intently on the collective message that this week’s talking feds send out. We get the Minutes from the last FOMC meeting. We will also get the Minutes from the last ECB meeting and have a speech from ECB President Draghi. Here is the very packed schedule for the week:
05/20: Raphael Bostic, Patrick Harker, Richard Clarida, Jerome Powell and the Chicago Fed’s National Activity Index
05/21: Raphael Bostic, Charles Evans and Eric Rosengren
05/22: James Bullard and the Minutes from the last FOMC meeting
05/23: Robert Kaplan, Tom Barkin, Raphael Bostic, Mary Daly and the Fed’s Balance Sheet
2) Trade War: China says that it is in “no rush” to resume trade talks but has invited U.S. Treasury Secretary Mnuchin back to China. Meanwhile, on the Huawei front, Google’s Alphabet has announced that it will cut off Huawei Mobile’s access to most of its Android operating system offerings. Also, German chipmaker Infineon Technologies said it would suspend deliveries to Huawei.
3) Geopolitical: Tensions continue to escalate between the U.S. and Iran and will be closely watched. But it’s Europe that may have a more immediate impact. The EU Parliament will start four days of elections on Thursday.
This Week’s Potential Volatility: Average
The bond market will be paying close attention to the geopolitical events and the overall tone of the Fed speakers. We’re not expecting rates to push out of the current tight range unless something unexpected happens geopolitically.
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 information on mortgages in the state of Texas? We’re a Texas mortgage lender with many years’ experience, offering a variety of affordable home financing programs. Take a look at our loan offerings today and request a free, no-obligation rate quote.