If you’ve been on the fence about locking in a mortgage rate, now may be the week to make a decision. We’re likely to see average volatility this week; however, rates could fluctuate more dramatically in the weeks ahead. In today’s Mortgage Market Update, we’ll take a look at the various economic and political events that could have the potential to affect the mortgage market. But first, we’ll review how rates move.
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) can move throughout the day, being affected by a variety of economic and political events. When MBS pricing goes up, mortgage rates or pricing typically decreases. When they drop, mortgage pricing generally goes up. Tracking these securities real-time is critical.
For more information about the rate market, contact our team 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 so far today. Last week the MBS market improved by +65bps. This was enough to move rates lower last 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 mortgage rates this week. 1) Brexit, 2) Trade War and 3) Across the Pond
1) Brexit: This story will continue to dominate all financial markets. PM May, could be voted out, or the cabinet could move to hold yet another referendum vote among the citizens of Great Britain. Or May’s proposal could pass…..the uncertainty is very unsettling for the markets.
2) Trade Wars: Hopes that some incremental agreement between the U.S. and China have fallen by the wayside and markets are now expecting a very long and expensive trade war. Expect a lot of rhetoric between now and the G20 meeting that runs from November 30 to December 1.
3) Across the Pond: We’ll get key inflationary readings (CPI) and manufacturing (Markit Flash PMI) from several of the largest economies outside of the U.S. this week.
Talking Fed this Week:
11/19 John Williams
11/23 Fed’s Balance Sheet
This Week’s Potential Volatility: Average
We have a shortened holiday week. The bond market will be closed Thursday and reopen on Friday for an abbreviated session. Look for volatility to be relatively low this week. However, with the thin trading, anything unexpected from the markets or geopolitically and we could see exaggerated movements.
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.