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 moving sideways so far today.
The MBS market
improved by +15 bps yesterday. This
caused rates or fees to mostly move sideways for the day.
The rates experienced moderate volatility yesterday.
Today's Rate Forecast:
Jobs: Its Big Jobs Friday!
- Non-Farm Payrolls (NFP) March -701K vs. est. of -100K
- NFP February revised upward from 273K to 275K
- NFP January revised downward from 273K to 214K
- The rolling three-month average is now -71K
- The national average hourly earnings rate rose by 11 cents to $28.62 per hour.
- The MOM gain in Average Hourly Earnings is 0.4% vs. est. of 0.2%
- The YOY gain in Average Hourly Earnings is 3.1% vs. est. of 3.1%
- The Unemployment Rate increased to 4.4% vs est of 3.8-4.0%
- The U6 Under Employment Rate increased to 8.7% vs est of 7.1%
- The Participation Rate fell to 62.7% vs est of 63.3%
Services: The March ISM Non-Manufacturing Report (2/3 of our economy) was much stronger than expected, showing an expansion of 52.5 vs. market expectations for a contraction of 44.0.
Mortgage: The mortgage industry is bracing for a huge wave of delinquencies. As households with at least one job loss related to COVID-19, they will essentially get a 180 day (yep HALF a year) forbearance on their mortgage payments for FHFA backed mortgages (Fannie, Freddie, Ginnie). Even households that have the savings/income to make the payments will elect not to. Yes, the payments will be tacked on to the end of the loan, but there are no late fees/penalties or hits to their credit report/score for signing up. Who wouldn't sign up?
Coronavirus: Here are this morning's headlines that are getting the attention of bond traders.
- US cases now above 246K and deaths above 6,058
- Global Cases now above 1.027M, deaths at 54K
- The White House invoked the Defense Production Act to boost 3M's production of face masks.
- Spain moved past Italy to be the world's number 2 COVID-19 leader
- Spain at 118K vs. Italy at 115K
- The second wave of COVID-19 is hitting Asia. Singapore announces month-long lockdown, China announces lockdown in province
Today's Potential Rate Volatility:
Rate volatility for the week was way down compared to the previous couple of weeks. This is fantastic for mortgage companies and borrowers. As expected, we had very weak jobs data today that is helping to push rates slightly lower.
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.