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. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending:
Neutral
Yesterday's MBS market was worse by -28 bps. According to Sigma Research
there was high volatility. Yesterday's movement was
potentially enough to worsen rates or fees. So far today the MBS market
is trading positive (lower rates). However, the MBS market is
starting to give back some of the gains of the morning.
Today's Rate Forecast:
Neutral
Sigma Research says the
market MBS market is starting to trade in a somewhat tight channel
even though we've seen some big shifts during the day. Very unlikely the new range will be breached until at the earliest Friday when Janet Yellen speaks on the economy,
from that speech markets will assess (interpret) what the Fed may do and when. Still a moving target as uncertainty is the hallmark of markets now. A lot of interest over what Greece and the EU will do if and when Greece may default but that is taking the eye off the ball; what happens with Greece is not as significant as it was months ago when the default concerns surfaced. The main focus is of course the economy and inflation estimates. At 2:00
PM EST this afternoon the FOMC minutes will be released from the April meeting, until then don’t expect much movement in the bond and mortgage markets. Friday Yellen will speak to the economic outlook. Trade volume already very thin
and likely to thin even more as many will be leaving for the first summer holiday, early close on Friday and Monday markets will be closed. Three day weekends usually cause traders to level out positions rather than hanging out there with other global markets open.
Today's Potential Rate Volatility:
High
According to Sigma Research
the risk for volatility is still high today. As noted above,
the holiday week can cause more volatility do to fewer trades.
We'll be watching closely at the FOMC minutes and Janet Yellen's speech
on Friday.
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.
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