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 sideways to slightly lower this morning. Last week the MBS market
worsened by -29bps. This
was enough to move rates slightly higher last week. We saw elevated rate volatility at the end of the week.
Today's Rate Forecast:
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Central Bank, 2) Domestic, and 3)Coronavirus/Stimulus
1) Central Bank: We hear from two major Central Banks and Canada. The Bank of Canada will give us their latest interest rate decision on Tuesday, but it's Thursday's interest rate decision by the Bank of Japan and the European Central Banks that will get the most attention of markets.
2) Domestic: We have a very big week for economic data. Thursday's GDP will take center stage as it's expected to move from a depression-era pace of -31.4 in the second QTR to climb back to zero by a 3rd QTR rise of +31.9. On Friday, we get the Fed's key measure of inflation with the YOY Core PCE reading. Those are the two biggest releases of the week, but we have many other second-tier releases all week long.
3) Coronavirus: While the National and International Covid cases spike to levels much higher than ever before...leading to renewed shutdowns in many states and nations, key negotiators on both sides of the Aisle say that stimulus talks "continue."
Treasury Dump: Here is this week's auction schedule:
- 10/27 2 year note
- 10/28 5 year note
- 10/29 7 year note
Today's Potential Rate Volatility:
There is a lot of economic data this week that can move rates. Look for rate volatility to continue this week as domestic economic news is released, and new information comes out regarding a potential stimulus deal.
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.