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 -18bps. This was enough to move rates slightly higher last week. We saw low rate volatility last week.
Today's Rate Forecast: Neutral
Three Things: The following three areas have the greatest ability to impact mortgage rates this week. 1) Geopolitical, 2) Fed and 3) Domestic.
1) Geopolitical: Lots going on here. The EU and Great Britain have agreed on the final Brexit deal over the weekend. However, British PM May must now "sell" that deal to her cabinet members and the voters which is very difficult. The EU and Italy are still at as well. The G20 summit will kick off on Friday and will get the most attention this week as we are looking for some movement in trade talks between Presidents Trump and Xi. U.S. border protection is also an issue as hundreds attempt to illegally enter the U.S. President Trump has threatened to close the entire border with Mexico which would stop shipments of goods.
2) Fed: While we get the Minutes from the last Fed meeting on Wednesday, the most critical event is Fed Chair Jerome Powell's speech at the Economic Club of New York as the markets are looking for some clues on if the Fed will raise rates in December or if they will stand pat.
Here is the Fed schedule this week:
11/27 Richard Clarida, Ralphael Bostic, Esther George, and Charles Evans
11/28 Jerome Powell
11/29 FOMC Minutes, Loretta Mester and Charles Evans
11/30 John Williams
3) Domestic: We get the 2nd revision to the 3rd QTR GDP, but the YOY Core PCE data on Thursday (the Fed's key inflation rate) will get the most attention. Friday's PMI data is very important but will be overshadowed by the G20 meeting.
Treasury Auctions this Week:
11/26 2 year note
11/27 5 year note
11/28 7 year note
Today's Potential Rate Volatility: Average
Rates have a lot to pay attention to this week. On a technical level, rates are in a tight channel. It will take something unexpected comments from Powell and or new developments with China to move rates out of its current channel.
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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