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:HIGHER
    Rates are trending higher this morning. Last week the MBS market remained unchanged. This caused rates to move sideways for the week. Even though rates ended unchanged, we did see some volatility through the week.


    This Week's Rate Forecast:HIGHER
    Three Things: These are the three areas with the greatest ability to move rates this week. 1) The Fed, 2) Domestic, and 3) Geopolitical.

    1) The Fed: The Federal Reserve Open Market Committee (FOMC) will begin two days of meetings on Tuesday that will culminate with their Interest Rate Decision and Policy Statement on Wednesday at 2:00 pm ET. While there is no chance of a change in their Fed Funds Rate, the market is very much on edge to see if the policy language shifts to a more "hawkish" tone which may include discussion about a "taper" (reducing the amount of their monthly Treasury and MBS purchases) or a "twist" (keeping the same level of purchases but shifting those dollars to shorter-term or longer-term instruments). This remains a lower probability, though, as the Fed has been quite clear that they are not near the point of adjusting their QE program. The market is focused on if at least the discussion is beginning (publicly) around tapering. Also, this is one of the meetings where we get their Economic Projections (the famous "dot plot chart"). Bonds will be very reactive to changes in the "groupings" of dots for inflation and rates.

    2) Domestic Flavor: We get some key data on Tuesday, including Retail Sales and PPI.

    3) Geopolitical: Congress is back in full session this week, and markets are keen on if an infrastructure deal can make it out of the House or Senate.

    This Week's Potential Volatility: HIGH
    Rate markets have a lot to digest this week. The Fed on Wednesday is the most significant event this week that can move rates. As denoted above, rate markets will pay close attention to the language in the policy statement. On Tuesday, the Producer Prices could increase volatility, but rate markets will likely remain on hold until Wednesdays.



    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.

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