Three Things Rate Markets Will Focus On Heading Into The New Year

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 sideways this morning.  Last week the MBS market improved by +18bps.  This may’ve been enough to very slightly move rates lower.  Rates continue to move mostly sideways on very low volatility.

THIS WEEK’S RATE FORECAST: NEUTRAL

Three Things: These are the three areas that have the greatest ability to move rates this week. 1) Trade Wars, 2) Geopolitical, and 3) Manufacturing.

1) Trade Wars: In a rare confirmation directly out of China’s controlled news outlet, the South China Morning Post, reported that Chinese Vice Premier Liu He will visit Washington this week to sign the “phase one” trade deal with the U.S.

2) Geopolitical: The U.S. has launched strikes in Syria and Iraq over the weekend, and the markets will be watching to see if this remains a surgical and isolated campaign or turns into something bigger.

3) Manufacturing: We get two key reports this week with Monday’s Chicago PMI and Friday’s ISM Manufacturing report. Friday’s report will carry much more weight.

THIS WEEK’S POTENTIAL VOLATILITY: LOW

We’re not likely to see much rate volatility heading into the new year. We could see rate volatility spike toward the end of the week with the “phase one” trade deal signing and manufacturing numbers.

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