Mortgage rates flat after solid move lower

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Published Date 9/26/2017

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 to a bit higher so far today. The MBS market improved by +16 bps yesterday. This probably was probably enough to improve mortgage rates or fees. The market experienced moderate volatility yesterday.

Today's Rate Forecast: Neutral

Location: The Case-Shiller YOY Home Price Index for July showed that home prices in 20 metro cities increased a stable 5.8%. But this is older data and a relatively small sample size, so it does not get the same attention as the median home sales price in the more current Existing Home Sales report.

August New Home Sales came in at 560K vs est of 588K which was a miss to the downside, but July was revised upward from 571K to 580K. The median price of a new home rose to $300,600 which is priced out of the first time home buyer market and therefore adding no inventory to that tight market.

Manufacturing: We got another regional report that was stronger than expected. The Richmond Federal District Manufacturing Index hit 19 vs est of 13.

Consumer Confidence: The September reading came in close to market expectations (119.8 vs est of 120.2). August was revised lower from 122.9 to 120.4. Actually, a good reading when you consider that this could have moved much lower with Harvey and Irma (which are part of this report's time period).

Treasury Auction: Today we kick off three days with our shorter-term 2-year note auction at 1EST.

Fed: Fed Chair Janet Yellen will speak today at 12:45 am. We will also hear from Charles Evans, Loretta Mester, Lael Brainard and Raphael Bostic.

Geopolitical: The likelihood of a repeal of Obamacare has diminished as yet another Republican Senator has announced that she will not vote for it which brings the total Republican "no" votes to 4 and they can only afford 2.

We will get the details of their Tax Reform push tomorrow. While we have received some leaks, the market is still awaiting real details.

Germany: Their Import Prices YOY rose by 2.1% which matched market expectations.

Today's Potential Rate Volatility: Average

After a pretty good day yesterday for mortgage rates, we're expecting a mild pullback today with low volatility. The one wildcard is if Janet Yellen says something unexpected this afternoon, which is highly unexpected.

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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