Three things that could impact rates this week

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Published Date 12/4/2023

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: Higher

Mortgage rates are under heavy pressure today. The MBS market improved by +97 bps last week. This may have been enough to decrease mortgage rates or fees. The market experienced high volatility last week.

Today's Rate Forecast: Neutral

Three Things: These are the three areas that can have the most impact rates this week. 1) Jobs. 2) Central Banks and 3) Services.

1) Jobs: We get a ton of job and wage related data this week culminating in Big Jobs Friday. We have ISM Services Employment Index, JOLTS, ADP, Unit Labor Costs, Challenger Job Cuts, Initial Weekly Jobless Claims, Non Farm Payrolls, Average Hourly Earnings, Unemployment Rate, Average Weekly Hours, U6 Under Employment and Labor Force Participation Rate.

2) Central Banks: The Bank of Canada is expected to keep their key interest rate at 5.00% however the markets will be very keen to examine their language hinting on a rate cut. Speaking of rate cuts, the bond market is balancing expectations of a rate cut by the ECB next week and will continue to try to front run the FOMC's decision next week.

3) Services: We got a mixed bag with Manufacturing last week with a huge beat in Chicago PMI but a very tame ISM. This week the focus will be on the services side which accounts for 2/3 of our economic engine and has almost single-handily kept our economy afloat. ISM Non Manufacturing PMI will hit on Tuesday.

Today's Potential Rate Volatility: High

This morning markets have seen some big pull back from last week's gains. Volatility has started high and will likely remain that way with the deluge of jobs data this week.

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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