|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.
Rates Currently Trending: Neutral
Mortgage rates are trending sideways this morning. Last week the MBS market worsened by -25bps. This was enough to worsen mortgage rates or fees. Mortgage rate volatility is relatively low so far today.
This Week’s Rate Forecast: Neutral
Three Things: The following three things have the greatest ability to impact mortgage rates this week: 1) The Fed, 2) Retail Sales/Domestic Data and 3) Oil
1) The Fed: The much-anticipated December Fed meeting is finally approaching. At this meeting, not only will we get their policy statement but also their economic projections (dot plot chart) and a live press conference with Janet Yellen. The market is widely expecting a 1/4 rate hike but if the Fed either does not hike rates or hikes rates more than a 1/4 point, it will cause a lot of volatility for MBS.
2) Domestic Data: We have a large plate of economic data this week including PPI and CPI but Retail Sales is the most important of the week.
3) Oil: WTI Oil is now above $53 as Saudi Arabia says that they’ll “do whatever” it takes to get production levels lower.
- 12/12 3 year and 10 year notes.
- 12/13 30-year bond
This Week’s Potential Volatility: Average
Today we expect mortgage rate volatility to be relatively low. Mortgage rates should continue to trade in the very tight range this week unless something unexpected happens at the Fed meeting on Wednesday. Another wild card is oil. The continue rise in oil prices is having a negative affect on mortgage rates.
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.