|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: Neutral
According to Sigma Research, Treasuries and mortgage bonds are starting better again this morning. Crude oil is declining again, keeping inflation fears on hold. Inflation is a primary driver of interest rates; if investors believe inflation is on the rise, they will find fixed income investments (including mortgage bonds) less attractive.
Today’s Rate Forecast: Lower
According to Sigma Research, the DJIA opened -33, MBS prices +13 bp, leading to slightly lower rates this morning. The declining price of crude oil provides nice support for the bond markets–and lower rates. The economic situation in Greece–its fears of debt default and its inability to elect a new prime minister–are pressuring Europe’s stock markets and supporting bond prices in the US.
Today’s Potential Rate Volatility: High
According to Sigma Research the risk for volatility is high today. Trading volume will be very thin this week. This low trading volume often means increased volatility.
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.