|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
Yesterday’s MBS market was better by +3 bps. According to Sigma Research there was moderate to low volatility. Yesterday’s move was not enough to affect rates or fees. This morning the MBS market is basically unchanged.
Today’s Rate Forecast: Neutral
Sigma Research says that the there was a lot of economic numbers that came out this morning, but the most surprising is the Durable Goods Orders which came in much stronger than expected (2.8% vs est of 1.7%). Normally this would put pressure on the MBS market (higher rates), but some of the other numbers including low inflation helped to counteract it a bit. Europe came out with some stronger than expected economic numbers which again should put a little pressure on the MBS market (higher rates). We are a little concerned that the moderate rally in the MBS (lower rates) is starting to stall out.
Today’s Potential Rate Volatility: High
According to Sigma Research the risk for volatility remains moderate to high. We continue to trade in a tight mortgage rate channel with high daily volatility, yesterday was a bit of an exception to that rule. However, we are going to still expect moderate to high volatility until we get a few days of calm markets.
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.