Three things that can move mortgage rates this week

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Published Date 3/5/2018

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 +3bps. This moved mortgage rates sideways last week. Mortgage rate volatility was relatively low last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week: 1) Geopolitical, 2) Central Bank and 3) Jobs.

1) Geopolitical: Tariffs and NAFTA. We still do not know the full specifics of the newly proposed tariffs. The bond market will be focusing on what "waivers" are issued, and to which companies/countries. Also, it is now very clear that tariffs on steel, etc. are being used as leverage on this week's NAFTA negotiations. Bond traders will closely monitor responses from other trading partners and more details from Washington.

2) Central Bank: The spotlight is on Thursday's European Central Bank meeting as the ECB will give us their latest interest rate decision and policy statement. Last week, Japan surprised markets by hinting at ending QE sooner than expected and on Friday will get the BofJ's interest rate decision and policy statement on Friday. We will also get the Bank of Canada's interest rate decision and policy statement.

3) Jobs: We get a lot of job and wage-related data almost every day this week either as an official headline release or an internal component of another type of economic release. Friday's YOY change in the Average Hourly Wage data will have more impact on rates than any other piece of jobs related data.

Fed: On Wednesday we get their Beige Book which is prepared specifically for the March FOMC meeting where it is widely expected that they will raise their Fed Fund Rate.

03/05 Randal Quarles
03/06 William Dudley, Lael Brainard, and Robert Kaplan
03/07 Raphael Bostic, Beige Book
03/09 Charles Evans

This Week's Potential Volatility: High

Mortgage rates are likely to be very volatile this week with the steady flow of jobs numbers, Central Bank meetings, and tariff talks. Hard to tell which way mortgage rates will shoot this week.

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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