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:
Mortgage rates are trending lower so far today. Last week the MBS market
worsened by -33ps. This
was enough to move rates or fees slightly higher for the week. We saw mild
rate volatility through much of the week.
Today's Rate Forecast:
Three Things: These are the three areas that will have the greatest ability to impact rates this week: 1) Coronavirus, 2) Central Bank, and 3) Geopolitical.
1) Coronavirus: This continues to be the number one concern among long bond traders and global economists due to the longer-term effects of a massive supply chain disruption. The steep decrease in consumer spending in China is also a big concern, as over 700 million citizens are now in areas that are locked down for travel, work, etc. Meanwhile, the number of "official" cases keeps rising as well as the death toll, while the real number is undoubtedly many times higher and cause for concern.
2) Central Bank: China's Central Bank will have its big policy meeting on Thursday. They have been active almost daily with lowering shorter-term interest rates, putting the brakes on selling in the stock market, and instructing banks not to call in delinquent loans. The focus Thursday will be on their key interest rate, which has not been part of the recent adjustments and any further fiscal stimulus. Back at home, we get the Minutes from our last FOMC meeting and a slew of speeches this week.
3) Geopolitical: While China has been soaking up the headlines, military activities, as well as injuries and casualties, have been increasing from Iran and their controlled groups upon American facilities.
Today's Potential Rate Volatility:
While we do have some important housing data this week, most of the attention in the rate markets will be focused on the Coronavirus. The disruption in the supply chains and the reduction in consumer spending in China will likely keep rates suppressed and increase volatility as more data is released.
If you are looking for the risks and benefits of locking your interest rate in today, contact your mortgage professional to discuss it with them.