Three things that can move mortgage rates this week

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Published Date 10/10/2017

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: Lower

Mortgage rates are moving slightly lower so far today. The MBS market worsened by -8 bps last week. This probably wasn't enough to worsen mortgage rates or fees. The market experienced high volatility last week.

Today's Rate Forecast: Neutral

Three Things: These are the three things that can have the most impact mortgage rates this week 1) Geopolitical, 2) Fed and 3) Domestic.

1) Geopolitical: We have two categories here. Foreign and Domestic. Foreign, the markets (and our govt) are watching closely to see if North Korea will launch its latest missile. This one has more significance as it is supposed to be capable of hitting the U.S. Today, starts a national holiday in N.K. and people are concerned that the test launch will be part of the celebration. Meanwhile, Spain said it will immediately arrest the new leader of Catalonia (even issued a death threat) if they followed through with their silly insistence that they are now independent just because they had a vote and everything.

Domestically, the markets are focused on Tax Reform. The House pushed through a budget last week which moved up the prospect of Tax Reform. However, it appears that TN Senator Bob Corker (just announced early retirement from the Senate) will not support the reform measures which basically kills it. Also on the radar is President Trump's executive order which is said to allow small businesses to pool together to purchase health insurance and to purchase it across state lines.

2) Fed: We get another heavy dose of speeches by key Fed members as well as the release of the Minutes from the last Fed meeting. The bond market is very focused on the "Game of Thrones" as President Trump will be appointing three voting board members soon, and the market will react to a change in perception of who the next Fed Chair will be.

10/10 Neel Kashkari and Robert Kaplan
10/11 Charles Evans and the FOMC Minutes
10/12 Jerome Powell and Raphael Bostic
10/13 Eric Rosengren, Charles Evans, Robert Kaplan and Jerome Powell

3) Domestic: We have a holiday-shortened week that is loaded on the backend with some big name economic reports. The bond market will focus on Thursday's PPI and Friday's CPI as key measures of inflation. Friday's Retail Sales will also be a driving force.

Treasury Auctions This Week:

10/11 10 year note
10/12 30 year bond.

Today's Potential Rate Volatility: Average

Mortgage rates are likely to be fairly flat to a little lower today. There's nothing on the economic calendar today that has the ability to significantly move mortgage rates. On the other hand, North Korea launching a missile could cause mortgage rates to drop and significantly increase rate 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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