Three things that can move mortgage rates this week

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Published Date 10/2/2017

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 slightly lower this morning. Last week the MBS market worsened by -21bps. This was enough to worsen mortgage rates or fees. Mortgage rate volatility was high last week.

This Week's Rate Forecast: Neutral

Three Things: These three areas have the greatest ability to impact mortgage rates this week. 1) Geopolitical, 2) Fed and 3) Domestic.

1) Geopolitical: The bond market is very much interested in the fallout of the Catalonia referendum which saw over 2M votes with 90% opting to leave Spanish control. This has the potential to push back the EU's tapering of their bond purchases which many have been speculating would begin soon. We also get the Minutes from the last ECB meeting.

We also will continue to react to any movement on the tax reform front as we hear from key members of the House and Senate.

2) Fed: While we will hear from Fed Chair Janet Yellen again this week the bond market is probably more influenced by shifting odds of who the next Fed Chair will be. Last week, Warsh got some traction which pressured MBS as he is viewed as being more "Hawkish" than Yellen.

10/02 Robert Kaplan
10/03 Jerome Powell
10/04 James Bullard, Janet Yellen
10/05 John Williams, Patrick Harker
10/06 Raphael Bostic

3) Domestic: We have our Big Jobs Friday which of course will get a lot of attention by the markets, but we also some very important reads with ISM Manufacturing and Services.

This Week's Potential Volatility: High

There's a lot going on this week politically and economically that can push mortgage rates higher or lower. The bias, as has been the case for some time now, is toward higher mortgage rates with above average volatility.

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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