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: HIGHER
    Mortgage rates are trending higher this morning. Last week the MBS market worsened by -54bps. This moved mortgage rates slightly higher last week. Mortgage rate volatility has been consistently moderate over the last week while rates are ticking higher.

    This Week's Rate Forecast: HIGHER
    Three Things: These are the three things that have the greatest ability to impact mortgage rates this week. 1) Central Banks, 2) Domestic and 3) Trade Wars.

    1) Central Bank:
    On Thursday we get the ECB. The market does not expect them to change their main interest rate, but they may move up their deposit rate which is currently -0.4%. They have also been sending conflicting messages to the markets on the timing of their bond purchase wind down. We also get the same out of Bank of Japan on Friday.

    2) Domestic:
    We have several big economic releases that have the gravitas to move pricing this week. But there are none bigger than our first look at GDP for the 1st QTR. Traditionally, the 1st GDP numbers are the weakest of the year. This time, the market is expecting a growth rate of 2.1%. The higher this reading is, the worse it is for bonds and rates.

    3) Trade Wars:
    For the time being it would appear that the momentum towards an all-out trade war has slowed as talks between China and the US support a wider mood and geopolitically, signs of improvement in relations between North Korea and the US also help. A historic meeting between the leaders of South and North Korea will also likely garner plenty of attention.

    Treasury Auctions this Week:

    • 04/24 2 year note
    • 04/25 5 year note
    • 04/26 7 year note

    This Week's Potential Volatility: Average
    Mortgage rates have been pushing higher over the last week on moderate volatility. Look for much of the same this week unless something happens with trade talks or North Korea talks.

    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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