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 sideways this morning. Last week the MBS market improved by +35bps. This may've been enough to move rates lower. There was a great deal of market volatility last week.

    This Week's Rate Forecast: NEUTRAL
    Three Things: : These are the three areas that have the highest potential to impact your mortgage rates. 1) Geopolitical, 2)Central Bank and 3) Jobs

    1) Geopolitical:
    Bond prices have crept up due in part to speculation that the Democrats may take the House and maybe even a seat or two in the Senate. Markets are viewing this as potentially negative for the markets. Brexit and Italy continue to cause major uncertainty about the future of Europe and now we hear that Germany's PM Merkel will not seek to reappointed as the PM, her term runs out in 2021 but may have to step down before that.

    2) Central Bank:
    As a "hard" Brexit looms, we will get the latest policy statement from the Bank of England. The Bank of Japan will also give us their latest policy statement on Wednesday.

    3) Jobs:
    We get a ton of jobs related data this week with ADP, Personal Income, Weekly Jobless Claims, Unit Labor Costs, Challenger Job Cuts, Non-Farm Payrolls, Unemployment Rate and more. The YOY Average Hourly Earnings will get the most attention and a reading above 3.0% could pressure bond prices.

    This Week's Potential Volatility: HGH
    Mortgage rates are at a significant technical level in a reasonably tight range. Today we're not likely to see a lot of rate volatility. The rest of the week could be a different story, particularly with the inflation and wage data due out as noted above.

    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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