Market Commentary

For the week of July 22, 2019

THREE THINGS THAT CAN MOVE RATES THIS WEEK

 

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 to slightly lower so far today.  Last week the MBS market improved by +22bps.  This may've been enough to slightly improved rates or fees.

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) Domestic.

1) Geopolitical: A lot is going on this week. We should (finally) learn who the next British Prime Minister will be (hint Boris Johnson) and should start to position for a hard Brexit. Iran's capture of vessel(s), oil shipments to China and announced prosecution of Americans that they claim are CIA spies will drive uncertainty in the area. Domestically, we have the Mueller testimony and a looming debt ceiling that only has until Friday to be nailed down before Congress breaks for the Summer.

2) Central Bank: The European Central Bank will release their interest rate decision and policy statement, followed by a live press conference with ECB President Mario Draghi on Thursday. Draghi has certainly let the markets know that the ECB is moving towards more accommodation. The markets are expecting more QE and even going as far as not only purchasing bonds but moving into stocks as well. However, that is not expected to be announced until the September meeting.

3) Domestic: We get our look at the 2nd QTR GDP. The first QTR grew at a robust clip of 3.1%, and the market is expecting a 2nd QTR reading of 1.8%. Any reading above 2% will be negative for rates.

THIS WEEK'S POTENTIAL VOLATILITY: AVERAGE

We could see some rate volatility on Thursday and Friday with the ECB meeting and GDP respectively. Until then, rates are likely to move sideways at very low levels. Of course, anything unexpected geopolitically could move rates.

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