Mortgage rates eyeing another government shutdown

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Published Date 2/8/2018

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: Neutral

Mortgage rates are moving sideways to slightly higher so far today. The MBS market worsened by -11 bps yesterday. This may've been enough to worsen mortgage rates or fees. The rates experienced moderate volatility yesterday.

Today's Rate Forecast: Neutral

Jobs: Initial Weekly Jobless Claims hit 221K vs est of 232K. The more closely watched 4-week moving average dropped to 224,500 which is A 45 year low.

Budget: The House bill that was passed on Tuesday needs to be torn up and they need to have a vote on the 2-year deal that the Senate supports. If the House can pass it, we won’t have to deal with this for 2 -years and removes a lot of doubt/fear in bonds (negative for pricing).

Treasury Auction: 30-year Treasury bond auction. This is the most important auction of the week.

Fed: Today we hear Robert Kaplan, Patrick Harker and Neel Kashkari.

Great Britain: Bank of England kept rates unchanged at 0.5%, and QE flat as expected in a unanimous 9-0 vote. But BOE raised its growth forecast and said that the "Committee judges that, were the economy to evolve broadly in-line with the February inflation report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November report, in order to return inflation sustainability to the target."

China: Their trade balance dropped from 361.98B down to 135.5B. Exports shot up 11.1% and imports also shot up by a massive 36.9% which is signaling strong growth.

Today's Potential Rate Volatility: Average

As the likelihood of a government shutdown rolls back, look for mortgage rates to see a bit of pressure with some volatility. Mortgage rate volatility is starting to come down after a wild few days.

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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