Housing and consumer confidence better than expected

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Published Date 2/27/2018

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: Higher

Mortgage rates are moving higher so far today. The MBS market improved by +6 bps yesterday. This wasn't enough to improve mortgage rates or fees. The rates experienced moderate volatility yesterday.

Today's Rate Forecast: Higher

Durable Goods Orders: The January reading was weaker than expected across the board with the headline reading dropping -3.7% vs an estimated drop of -2.0%. When you strip out the volatile transportation sector, it dropped by -0.2% vs an expected increase of +0.5%. This report was seen some very wild swings and is largely discounted by traders compared to the impact that this report once had.

Housing: The December 20 metro city Case-Shiller Index showed a YOY home price gain of 6.3% which is just off of November's pace of 6.4%. The FHFA December reading showed a YOY price gain of 6.5%.

Consumer Confidence: Feeling good in the neighborhood! The February reading hit 130.8 which was much higher than expectations of 126.4 and is the highest reading since 2000.

Fed. Fed Chair Jerome Powell just started his live testimony in the Semi-annual Monetary Policy hearing in front of the House Financial Services Committee.

At 8:30 AM ET, the market received his prepared remarks. Here are a few headlines:

"some of the headwinds the U.S. economy faced in previous years have turned into tailwinds."
"inflation remains below our 2 percent longer-run objective. In the FOMC's view, further gradual increases in the federal funds rate will best promote the attainment of both of our objectives. As always, the path of monetary policy will depend on the economic outlook as informed by incoming data."
"These interest rate and balance sheet actions reflect the Committee's view that gradually reducing monetary policy accommodation will sustain a strong labor market while fostering a return of inflation to 2 percent."

Today's Potential Rate Volatility: High

Mortgages will be paying close attention to Fed chairman Powell's testimony today which could cause some rate volatility.

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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