|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 worse by -63 bps. According to Sigma Research there was high volatility. Yesterday’s move was likely to have a negative effect on rates. This morning the MBS market is essentially unchanged. The drop in the MBS market (worse rates) yesterday was not surprising. However, the magnitude did catch everyone a bit off guard.
Today’s Rate Forecast: Higher
Sigma Research says that we had some economic news come out this morning, but nothing significant enough to move rates. The market should remain fairly calm, at least until 2:00 PM EST when the FOMC minutes are released. This can always cause market swings. We’re approaching oversold territory which means we could see a slight improvement in rates, but not expecting the overall trend to change in the medium term. Greece debt issues are still there, but recently it has not been a market mover as it’s believed a deal will be worked out.
Today’s Potential Rate Volatility: High
According to Sigma Research the risk for volatility remains high. As denoted above, the FOMC is releasing minutes at 2:00 PM EST and this can be a market mover. We’ll be keeping an eye out for any information that is outside expectations.
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.