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 worsened by -10 bps last week. This was not enough to increase mortgage rates or fees. The market experienced moderate volatility last week.
This Week's Rate Forecast: NEUTRAL
Three Things: that have the greatest ability to impact rates this week. 1) Inflation, 2) Central Banks and 3) GDP
1) Inflation: We get the Fed's key inflation gauge on Friday with PCE as well as Personal Incomes and Spending. Will this follow the recent softening in CPI and PPI or buck the trend? The weaker this data is, the better it will be for pricing.
2) Central Banks: We get a key interest rate decision from the Bank of Canada on Wednesday, they are expected to raise by only 25BPS.
3) GDP: We get the final look at the 3rd QTR GDP and our first look at the 4th QTR GDP data on Thursday.
Treasury Sales: We have a batch of shorter to mid-term notes this week
01/24 2 year note
01/25 5 year note
01/26 7 year note
The Fed: The media blackout period has started leading up to the next FOMC meeting so we wont be getting any comments from any members of the Fed regarding their policy this week.
This Week's Potential Volatility: NEUTRAL
This morning markets have been moving in a narrow channel. Volatility has started moderately high but may spike later in the week.
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.