|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, yesterday the stock market got tagged had, but there is a little rebound in early activity. Mortgage bonds lost -1 bp, causing rates to move sideways, but the technical picture is still bullish (lower rates). All eyes are on the FOMC announcement at 2:00 EST today.
Today’s Rate Forecast: Neutral
According to Sigma Research, mortgage bonds opened +8bps from yesterday’s close, which means rates today will be about what they were yesterday. There is a growing consensus that the Fed will not raise its key rate this year, but may wait until next year because of clear weakness in financial markets across the globe. Europe is teetering on recession, China’s economy is slowing and there is possible disruption in the EU in the wake of the recent Greek elections. Finally, recent data here in the US do not support the view of strong growth. All this supports the likelihood of lower rates.
Today’s Potential Rate Volatility: High
According to Sigma Research the risk for volatility is high today. The market is assessing the global economic weakness, the strength of the US dollar, which tends to hinder exports, and the uncertainty about what direction the Fed will take. The language in its statement after the FOMC meeting at 2:00 today has a strong potential to move 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.