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 +34bps. This may've been enough to move rates or fees lower last week. We saw low rate volatility through the week.
THIS WEEK'S RATE FORECAST: NEUTRAL
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) VWUL, 2) Jobs and 3) The Fed
1) VWUL: What does that stand for? Those are the various recovery line chart patterns that closely resemble a letter in our alphabet. A "V" recovery is a very sharp rebound while a "U" recovery has a sharp rebound but only after a long period of recession. The number of Covid-19 cases, infection rates, and hospitalization rates is an important factor in projections for the recovery's letter shape. Today's headlines are not pointing towards a "V":
- Over 10 Million global cases, 500K deaths
- Texas' rate of positive tests hit an all-time high of 14%, Dallas asks Gov to reinstate stay at home order.
- California orders bars to close in 7 counties to close and recommends closure in 8 additional counties.
- Florida sees record weekly Covid cases but refuses to publish hospitalization rate.
- Health and Human Services Secretary Alex Azar warned Sunday that the "window is closing" to curb the spread of the virus and get the outbreak under control.
- So far, 14 states have either paused or reversed some of their openings.
- Yelp reports that 41% of businesses that have a listing on the popular directory have closed permanently.
- The U.S. continues to set new records above the 7-day trendline.
- China locks down 500K
2) Jobs: We get a huge dose of jobs and wage data this week, much of it on Thursday as the bond market is closed on Friday. Some of the key readings are the Unemployment Rate, Average Hourly Wages, Non-Farm Payrolls, Initial Weekly Jobless Claims, ADP Private Payrolls, and some internal employment readings in ISM manufacturing.
3) The Fed: We will hear from Fed Chair Powell and Treasury Secretary Mnuchin on Tuesday as they testify before Congress on the status/implementation of the CAREs Act and other emergency measures.
THIS WEEK'S POTENTIAL VOLATILITY: LOW
The trading markets are closing early on Thursday and are closed Friday in observance of Independence Day. We're likely to see rates move sideways on low volatility all week. The only thing that can spike rates higher is unexpectedly good economic news.
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.