Ryan's Rate Commentary

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 moving sideways today. The MBS market improved by +15 bps last week. This was not enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: LOWER
Three Things: These are the three areas that have the greatest ability to impact rates this week: 1) Retail Sales, 2) The Fed and 3) Central Banks.

1) Retail Sales: This is the last major economic release prior to the FOMC decision on Wednesday that has the ability to impact their policy. Basically, if this report is hotter (stronger) than expected it may seal the deal on a 25BPS move from the Fed. However, if this is much weaker than expected, it may give more weight to a 50BPS move.

2) The Fed: Its finally here, the much anticipated end to the Fed's "do nothing" stretch as they shift gears into a declining rate path. However, the pace and scope of that path will have a big impact on rates. We will get their Interest Rate Decision and Policy statement on Wednesday at 2 pm ET. We also get their Economic Projections which is where the "dot plot" chart is derived from. The path of cuts that this "dot plot" chart show will carry significant weight among bond traders. So will the amount of this initial cut... will it be 25BPS or 50BPS? Then at 2:30 pm we will get a live Presser from Fed Chair Powell.

3) Central Banks: Our Federal Reserve is not the only game in town as we get key interest rate decisions from several of the world's largest Central Banks which include the Bank of England, The People's Bank of China and The Bank of Japan.

This Week's Potential Volatility: HIGH
This morning markets got an initial boost on geopolitical concerns but have already leveled out. Volatility will be high this week with markets focused on the FOMC.

Bottom Line:
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.