|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 +5 bps. According to Sigma Research there was high volatility. Yesterday’s movement was not likely enough to affect rates or fees. So far today the MBS market is trading essentially neutral.
Today’s Rate Forecast: Neutral
Sigma Research says that April retail sales at 8:30 AM EST this morning were weak; sales were expected to increase 0.2% overall, sales were reported unchanged; sales ex auto sales were expected +0.5%, as reported up just 0.1%. Less autos and gasoline sales were thought to be up 0.4%, as reported up 0.2%. This kind of news would normally cause the MBS market to spike (lower rates). However, the reaction is fairly mild so far today. The Greece debt issue is still weighing on the market, but as it continues to get kicked down the road we’re seeing that it’s affecting the mortgage rate market less and less. That could certainly change if Greece is pushed out or leaves the EU.
Today’s Potential Rate Volatility: High
According to Sigma Research the risk for volatility for today is high. While yesterday ended up +5 BPS, which is essentially unchanged, the MBS market was all over the place. Until we see a change, we’ll continue to caution for high volatility.
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.