Three things that can move rates this week

___

Published Date 10/19/2020

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.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways so far today. Last week the MBS market improved by +5bps. This caused rates to remain unchanged for the week. We saw moderate volatility through the week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Stimulus, 2) The Fed, and 3) Central Bank.

1) Stimulus: After weeks of on-again, off-again talks, House Speaker Pelosi has issued a deadline for Tuesday for there to be an agreement or that no agreement would be able to be completed before the election. Meanwhile, President Trump has tweeted that he wants a "really big" stimulus package. However, many in the Senate are not in favor of adding a large amount of debt and favor a smaller and more targeted package. If a package does get done, then rates will worsen. If a package does not get done (which is what most are assuming), then rates will remain at current trend lines.

2) The Fed: We get a heavy dose of Fed-Speak as we near their "black out" period leading up to their next FOMC meeting. Here is the schedule:

10/19 Fed Chair Powell, Vice Chair Clarida, and NY President Williams
10/20 Vice Chair Quarles
10/21 Brainard, Fed's Beige Book
10/22 Fed's Balance Sheet

3) Central Bank: We get the latest Interest Rate Decision and Policy Statement from the world's number 2 economy, the People's Bank of China on Tuesday. We also have important speeches by ECB President Lagarde as well as other key global central bank figures.

Treasury Dump: We have a key 20 year Treasury bond auction on Wednesday to watch.

Housing: We have a ton of housing-related data this week; none of it will impact rates, but it is key information: NAHB Housing Market Index, Housing Starts, and Building Permits, Existing Home Sales.

This Week's Potential Volatility: Average

Rate markets were mostly unchanged last week with moderate volatility. We expect mostly the same action this week. We get a lot of important housing news, but it won't move rates. The big factor for rates this week is a stimulus deal. If Congress agrees to a deal, we will likely see volatility spike and rates tick higher

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.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

Guardian Mortgage, a division of Sunflower Bank, N.A.