Mortgage rate activity is staying in the middle of the road this week, so to speak. Current trends see neutral movement and experts predict it will remain that way for the week ahead. Before we take a look at the details, let’s review how mortgage rates behave in a typical market.

How Mortgage Rates Move

Conventional and government (FHA and VA) lenders establish their mortgage pricing by the activity of Mortgage Backed Securities (MBS), which are financial products that are traded in real time, all day in the bond market. 

Because MBS pricing can fluctuate for a variety of reasons, mortgage rates or loan fees (mortgage pricing) often moves throughout the day, being affected by economic and/or political events.  When MBS pricing goes up, mortgage rates typically fall.  When MBS pricing decreases, mortgage rates usually go up.

Tracking these securities real-time is critical.  For more information about the rate market, contact us directly.  We are among few mortgage professionals who have access to live trading screens during market hours.

Mortgage Market Update – September 10, 2018

Rates Currently Trending – Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market worsened by -23bps.  This was enough to move rates higher for the week. There was a great deal of mortgage rate volatility on Friday.

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.) Trade Wars, 2.) Central Bank and 3.) Domestic

1) Trade Wars: Tensions between the U.S. and China increased on Friday when President Trump threatened taxes on practically all Chinese imports, threatening duties on $267 billion of goods over and above planned tariffs on $200 billion of Chinese products and that is on top of the $60B in tariffs already in place. In total, this adds up to slightly more than ALL of the Chinese goods imported into the U.S. in 2017. China has said it will respond “in kind,” but they don’t import nearly that much from the U.S., so it is unclear what (if any) leverage they have. NAFTA is still in limbo as Canada, and the U.S. are still trying to hammer out terms.

2) Central Bank: The European Central Bank will take center stage, they are expected to hold their interest rate at 0.0%. However, the markets will be focusing on ECB President Mario Draghi’s live press conference afterward to see if there’s any slant towards the timing of their first rate hike and if their plans to end their QE bond-buying program by the end of this year is still on track. We also will get a rate decision out of the Bank of England. Our own Federal Reserve will release their Beige Book which is compiled to be used in their next Fed meeting.

3) Domestic: We have several key reports this week that have the gravitas to move mortgage rates. On the inflation front, we get both PPI and CPI – the bond market will focus the most on CPI YOY ex-food and energy. Retail Sales on Friday will also get a lot of attention.

Treasury Auctions this Week:

  • 09/11 – 3 year note
  • 09/12 – 10 year note
  • 09/13 – 30 year bond

This Week’s Potential Volatility – Average

Mortgage rates ticked higher last week on elevated volatility on Friday. Look for rates to move sideways ahead of inflation numbers and retail sales on Friday. Of course, anything new on the trade front could cause volatility.

Bottom Line

There are risks and benefits associated with locking in a mortgage rate. If you are considering the options and ready to discuss your decision, please reach out to your mortgage loan officer today.

If you’re looking for Texas home financing, please connect with our team of mortgage professionals to explore the options and receive a free rate quote. We offer a variety of home loan programs, from conventional to FHA to refinancing and more.