|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 worse by -34 bps. According to Sigma Research there was high volatility. Yesterday’s move may’ve been enough to have an affect on rates or fees. The market this is trying to pick up some of the loses from yesterday and the day before.
Today’s Rate Forecast: Neutral
Sigma Research says that the decline in the dollar and the recent run-up in oil prices are the two drivers that have pushed mortgage rates higher over the last two days. Yemen rebels are causing Saudi Arabia and Egypt to retaliate with air strikes and possible ground troops helped push crude prices up. A bit of news this morning with the final Q4 GDP which was unchanged. This is unlikely to be market mover. Europe’s economy seems to be improving which is causing investors to sell the dollar and buy the Euro. This is another factor in the decline in the MBS market (worse rates) over the last couple of days. We are hopeful with no planned news for the rest of the day and the recent decline in the MBS market that we can hold or make up a little ground this morning. But with all the turmoil and uncertainty overseas, it’s anyone’s guess right now.
Today’s Potential Rate Volatility: High
According to Sigma Research the risk for volatility for today is high today. We’ve been saying for awhile now that volatility would increase after the FOMC meeting last week and that certainly has held true. Volatility is nothing more than uncertainty. Look for the same today.
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.