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: LOWER
Rates are trending lower this morning. Last week the MBS market improved by +69bps. This was enough to move rates lower last week. We saw high rate volatility throughout the week.
THIS WEEK’S RATE FORECAST: LOWER
Three Things: These are the three areas that have the greatest ability to move rates this week. 1) Coronavirus, 2) Central Bank and 3) Domestic
1) Coronavirus: As we have been chronicling, the Corv-19 virus is spreading to more and more places, and numbers continue to spike, the steady stream of negative news continues to spook the stock market and financial systems worldwide. This story will only continue to get worse, and that fear will continue to drive money into long bonds, which is good for rates. Here is the recent round of headlines for Monday Morning:
- The coronavirus now in 7 US states: Washington, California, Illinois, Rhode Island, New York, Florida, and Oregon.
- Washington State confirms 2nd Death.
- EU confirms 38 deaths.
- Former FDA Director Scott Gottlieb says the REAL number of cases in the US likely in the THOUSANDS as very few (CDC confirms ONLY 466 people have ever even been tested in the US). As test kits get distributed, the US is likely to see a massive spike in confirmed cases.
- Japan reports 15 new coronavirus cases, Reuters reports, bringing the country total to 271.
- South Korea reported 599 new cases of coronavirus raising its total to 4,335 and death toll to 2.
- China reported another 42 deaths. However, news out of China is largely ignored as it’s viewed as “highly manipulated lower.” They refuse to officially classify tens of thousands of cases that have been confirmed as Corv-19 via one test. Because they don’t follow up with two other tests after that point, they are not considered as passing the threshold for Corv-19 confirmation.
- Another senior Iranian official and close advisor to Ayatollah Ali Khamenei has died of coronavirus, becoming at least the fourth government official to succumb to the virus.
2) Central Bank: We’ll hear from the Bank of Canada this week on their Interest Rate decision and policy statement. The stock markets are clamoring for the Federal Reserve to save their bacon, with the market pricing in at least one if not two emergency rate cuts in the next two weeks. The Bank of Japan just stepped in and purchased a RECORD 101 Billion Yen in ETFs to stabilize markets.
3) Domestic: We get some very heady economic releases this week with ISM Manufacturing and Services and a ton of Jobs data with ADP, Weekly Claims, Challenger Job Cuts, Non-Farm Payrolls, Unemployment Rate, and Average Wages
THIS WEEK’S POTENTIAL VOLATILITY: HIGH
Rates and volatility this week will once again be dictated by coronavirus news. We could also see the Fed act this week, which can inject volatility into the market.
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
