|How Rates Move:
Conventional and Government (FHA 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. This means rates or loan fees (mortgage pricing) moves 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. 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: Higher
Yesterday’s MBS market was worse by -21 bps. According to Sigma Research there was high volatility. Yesterday’s movement was potentially enough to affect rates or fees. So far today the MBS market is trading positive (lower rates).
Today’s Rate Forecast: Neutral
Sigma Research says Wholesale prices in April (PPI) were expected to have increased 0.2%, as reported prices declined 0.4%, excluding food and energy prices were thought to be up 0.1%, as released down 0.2%. Another indication that inflation concerns may be over-stated. This is generally positive for mortgage rates. This morning the MBS market trying to hold onto initial gains on the 8:30 AM EST data; that was the situation yesterday after the very soft April retail sales report but prices didn’t hold and another swift move to lower prices unfolded at 11:30 AM EST yesterday.
Today’s Potential Rate Volatility: High
According to Sigma Research the risk for volatility for today is high. The MBS market has been extremely volatile and we see no reason to think today will be the any different. Yesterday morning we saw some significant gains just to have them evaporate later in the day. We’re hoping that won’t happen again this morning.
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.