Housing starts dip in August, but permits jump

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Published Date 9/19/2017

Today'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 moving sideways ro a little lower so far today. The MBS market worsened by -14 bps yesterday. This may've been enough to worsen mortgage rates or fees. The market experienced low volatility yesterday.

Today's Rate Forecast: Neutral

Location: We got another shot of housing news this morning. August New Housing Starts were better than expected (1.180M vs est of 1.175M). Plus, July was revised higher from 1.155M up to 1.190M. Housing Permits also were better than expected (1.300M vs est of 1.220M) and July was revised higher from 1.223M from 1.230M. Overall an excellent report.

Inflation: Just like last week's PPI and CPI increases, we have another report this morning that is showing some inflationary pressure. Import Prices jumped by 0.6% in August vs est of 0.4%. On a YOY basis, it moved from a 1.5% pace in July to a 2.1% pace in August.

Fed: Today, they started their two-day FOMC meeting which will end with tomorrow's policy statement and live press conference with Fed Chair Janet Yellen.

Geopolitical: The three items that the market assumed were dead due to political infighting: Healthcare, budget, and taxes appear to be back in play. The Senate GOP is trying to fast-track a repeal bill by Sept 30th that seems to have support, but it is still unknown if it has over 50 votes. But McCain (which famously cast the deciding NO vote last time around) is said to be open to the new changes. They are also proposing budget cuts and tax reform continues to gain some ground. Any significant momentum in these three areas would be negative for MBS.

The markets will also focus on President Trump's speech at the United Nations today.

Today's Potential Rate Volatility: Average

We're looking for a relatively low volatility day today with little risk of mortgage rates going higher. President Trump's speech to the UN could cause some volatility if there's an unexpected announcement.

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

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