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: Neutral Mortgage rates are trending sideways this morning. Last week the MBS market worsened by -23bps. This was enough to move rates higher for the week. There was a great deal of mortgage rate volatility on Friday. Today's Rate Forecast: Neutral Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week: 1) Trade Wars, 2) Central Bank and 3) Domestic 1) Trade Wars: Tensions between the U.S. and China increased on Friday when President Trump threatened taxes on practically all Chinese imports, threatening duties on $267 billion of goods over and above planned tariffs on $200 billion of Chinese products and that is on top of the $60B in tariffs already in place. In total, this adds up to slightly more than ALL of the Chinese goods imported into the U.S. in 2017. China has said it will respond "in kind," but they don't import nearly that much from the U.S., so it is unclear what (if any) leverage they have. NAFTA is still in limbo as Canada, and the U.S. are still trying to hammer out terms. 2) Central Bank: The European Central Bank will take center stage, they are expected to hold their interest rate at 0.0%. However, the markets will be focusing on ECB President Mario Draghi's live press conference afterward to see if there's any slant towards the timing of their first rate hike and if their plans to end their QE bond-buying program by the end of this year is still on track. We also will get a rate decision out of the Bank of England. Our own Federal Reserve will release their Beige Book which is compiled to be used in their next Fed meeting. 3) Domestic: We have several key reports this week that have the gravitas to move mortgage rates. On the inflation front, we get both PPI and CPI - the bond market will focus the most on CPI YOY ex-food and energy. Retail Sales on Friday will also get a lot of attention. Treasury Auctions this Week:
09/11 3 year note
09/12 10 year note
09/13 30 year bond
Today's Potential Rate Volatility: Average Mortgage rates ticked higher last week on elevated volatility on Friday. Look for rates to move sideways ahead of inflation numbers and retail sales on Friday. Of course, anything new on the trade front could cause volatility. Bottom Line: 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.
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