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 trending slightly higher so far today. Last week the MBS market improved by +5bps. This caused rates and fees to remain mostly unchanged. We saw moderate rate volatility throughout most of the week.


    This Week's Rate Forecast: NEUTRAL
    Three Things: These are the three areas that can move rates this week 1)Trade Wars, 2) Geopolitical, and 3)Domestic.

    1) Trade Wars:
    It is expected that the U.S. and China will sign the Phase 1 trade deal on Wednesday. At that point, the markets should have all of the final details of exactly what is in (and what is not in) the trade deal.

    2) Geopolitical:
    Brexit is very much on the bond market's mind as the January 31st deadline is fast approaching. While the Brexit deal has made it out of the lower chamber, Monday kicks off with the House of Lords beginning debates on Brexit Withdrawal Agreement Bill. On the Iranian front, military escalation seems to have abated, but that could turn on a dime, and bonds will continue to be very reactive to any action(s).

    3) Domestic Flavor:
    Retail Sales and CPI will get the most attention. The stronger these reports are, the worse it will be for pricing.

    The Fed: Here is the Fed's schedule this week:

    • 01/13 Eric Rosengren, Raphel Bostic
    • 01/14 John Williams, Esther George
    • 01/15 Patrick Harker, Robert Kaplan, Fed's Beige Book
    • 01/16 Michelle Bowman, Fed's Balance Sheet
    • 01/17 Randal Quarles

    This Week's Potential Volatility: AVERAGE
    We have some domestic economic data this week that can move rates and spike volatility. For rates to move significantly lower, it will take something unforeseen on the geopolitical front, mainly from Iran. Short of something unexpected, look for rates to trial slightly higher on moderate volatility.



    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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