This Week's Mortgage Rate Summary
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.
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Rates Currently Trending: Neutral
Mortgage rates are trending sideways this morning. Last week the MBS market improved by +42 bps. This was enough to improve mortgage rates or fees. Last week was a very volatile week for mortgage rates and the markets.
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This Week's Rate Forecast: Neutral
Three Things: The following three areas have the greatest ability to impact mortgage rates week: 1) Geopolitical, 2) Fed and 3) Oil.
1) Geopolitical: In addition to the many "twists and turns" over Comey-gate, we will also see more details of the President's budget proposal and lots of headlines from his trip overseas. These will continue to be the main driving force in MBS pricing.
2) Fed: The bond market no longer has two more rate hikes plus a tapering in the place. In other words, they do not believe the Fed. This week, we will get the Minutes from the last FOMC Meeting and a slew of speeches:
- 05/22 - Neel Kashkari, Patrick Harker, Lael Brainard and Charles Evans
- 05/24 - FOMC Minutes, Robert Kaplan
- 05/25 - James Bullard
- 05/26 - John Willams
3) Oil: OPEC will hold their meeting on Thursday. The key is if they extend the timeline (expiration date) of the current production freezes and/or increase the production cuts. Their action (or inaction) will have a significant impact on global oil prices, and MBS will react to any inflationary impact.
Treasury auctions this week:
- 05/23 2 year note
- 05/24 5 year note
- 05/25 7 year note
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This Week's Potential Volatility: Average
Mortgage rates today will likely move sideways with average to low volatility. However, this week we could once again see high volatility due to technical, fundamental and geopolitical issues 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.