|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 better by +29 bps. According to Sigma Research there was moderate volatility. Yesterday’s move may have been enough to improve rates, but this morning some of those gains might be wiped away. This morning the MBS market is slightly worse.
Today’s Rate Forecast: Higher
Sigma Research says that the economic news out of Europe was better this morning. Germany leading the way for better GDP growth; in Q4 European Union’s statistics agency said Friday the combined gross domestic product of the 18 countries that then shared the euro was 0.3% higher in the fourth quarter than in the third; forecasts called for 0.2% growth. This is slightly positive news for the EU’s overall economy which could put pressure on the US mortgage rates. Good news for new home purchases; the Builder Application Survey showed that mortgage applications for new homes climbed 29% in January relative to December, not accounting for seasonal adjustments. This of course is good news for housing, but could also put a little pressure on interest rates as it is positive economic news.
Today’s Potential Rate Volatility: High
According to Sigma Research the risk for volatility remains high, but does seem to be calming a bit. While the volatility has tampered down a bit over the last few days, we’re a little concerned about the thin trading that will be occurring today ahead of a holiday weekend. This can cause some major swings in the market.
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.