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 to slightly lower so far today. Last week the MBS market worsened by -11bps. This may've moved mortgage rates slightly higher last week. Mortgage rate volatility was very high last week.

    This Week's Rate Forecast: NEUTRAL
    Three Things: These are the three things that have the greatest ability to move mortgage rates this week: 1) Domestic, 2) Across the Pond and 3 ) Geopolitical.

    1) Domestic:
    Inflation Watch. The biggest event of the week is the CPI report on Wednesday. It is unusual because it is released this week before PPI which is released the next day. It is usually the other way around. This report is expected to show inflation at above 2%. The higher it is, the worse it will be for mortgage rates. We also have Retail Sales that same day which will be important to watch. Also, with bonds focusing on increased deficits (which are always inflationary), Monday's Treasury Budget will get a lot of attention as it will be the first budget that has the tax cut in it.

    2) Across the Pond:
    Besides the Olympics, there's plenty going on overseas. In the order of the largest economies (besides the U.S.): China - Chinese New Year, Japan - GDP, Germany - GDP, CPI, Great Britain - PPI, CPI and Retail Sales, Eurozone - GDP.

    3) Geopolitica:
    The bond market is hedging towards global central banks tightening in the near future along with tapering bond purchases, we also have our own infrastructure and budget/deficit concerns with the 2019 budget proposal out of the White House.

    This Week's Potential Volatility: HIGH
    Mortgage rates will pay close attention to the CPI report on Wednesday. Look for continued volatility, particularly if the stock market continues its wild swings.



    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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