Mortgage Rates
Currently Trending
Today’s Mortgage
Rate Forecast
Today’s Potential
Rate Volatility
Neutral Neutral High

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.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are moving sideways today.  The MBS market improved by +34 bps yesterday. This was enough to improve mortgage rates or fees.    The market experienced high volatility yesterday.

Today’s Rate Forecast: Neutral

Housing: June Case-Shiller Home Price Index showed their 20 metro city index with pricing gains of 5.1% on a YOY basis which was close to market expectations of 5.2%. Not a factor in pricing as its older data and from a sample size that is too small. Median prices in Existing Home Sales is a much better gauge. Consumer Confidence: Surprised to upside and had its best reading since September 2015. The August reading came in at 101.1 vs est of 97.0. Some gems from the report are that describing jobs as “harder to find” increased by 1.3% which shows more tightening in the labor market. They also saw their incomes increasing in the near future and many had plans upsize/upgrade their homes. Fed: Federal Reserve Vice Chairman Stanley Fischer said incoming economic data will determine the trajectory of interest-rate increases and expressed optimism that productivity growth will rebound. “The work of the central bank is never done, and I don’t think you can say ‘one and done’ and that’s it,” Fischer said, speaking Tuesday on Bloomberg Television he also said: “We can choose the pace, but we choose the pace on the basis of data that’s coming in.”Today’s Potential Rate Volatility: High

The high volatility yesterday was a bit unexpected, but the move to lower rates was welcome. We expect the volatility to continue with a bias toward higher mortgage rates relative to yesterday’s close.

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.

Daily Market Analysis
A strong rebound yesterday after the selling on Friday on Yellen’s speech. On further thoughts markets reversed the selling on Friday and actually ended better than prices and yields on Thursday last week prior to Yellen at Jackson Hole. This morning a little pull back but not much in early trading. Yesterday the dollar was generally flat, this morning the dollar stronger against a basket of currencies, the index at 95.87 +0.30 and better against the yen and euro. Focusing on the dollar these days helps understanding what the world believes the Fed will do; not likely to increase rates in Sept and still a toss-up for Dec. The media (CNBC, Bloomberg, Fox News) tilting toward a rate increase soon; the markets where the reality is, not so sure at the moment.

Stanley Fischer, Federal Reserve Vice Chairman, saying that the U.S. economy was close to full employment, reinforcing speculation that policy makers are moving toward raising interest rates. The dollar index increased to a three week high on his remarks. On negative interest rates (something the Fed is not thinking about) Fischer said “We’re in a world where they seem to work,” Fischer said, noting that while negative rates are “difficult to deal with” for savers, they typically “go along with quite decent equity prices.” Translation: negative rates hurt consumers but keep stock markets from facing economic reality. In Japan where negative rates are likely to become more negative household spending fell 0.5% in July from a year earlier, Japan’s economy is struggling to gain momentum, evidenced by slower expansion in gross domestic product than economists forecast in the second quarter. Negative rates working?

July personal spending was less than expected yesterday but not much; +0.3% down from +0.5% in June. June though was strong and one month shouldn’t cause much change in outlooks, regardless of one’s opinion; consumer spending rose for a fourth month. At 9:00 the June Case/Shiller home price index, +5.1% as expected. We don’t pay a lot of attention to it but it does get noticed.

Crude oil has stabilized at a decent level keeping gasoline prices down. The price of food at home is down 1.6% on a seasonally unadjusted basis in the 12 months through July, says the BLS. Inflation worriers should pay more attention to the levels. No inflation in those sectors, no inflation in consumer prices, no pricing power in businesses; yet Yellen and Fed officials continue say inflation is increasing. Not sure what they are looking at; consumer staples are flat to declining.

At 9:30 the DJIA opened unchanged, NASDAQ +4, S&P +1. 10 yr 1.57% unchanged. FNMA 3.0 30 yr coupon -2 bps from yesterday’s close but up +20 bps from 9:30 yesterday.

At 10:00 the Conference Board released its August consumer confidence index,expected unchanged at 97.3 originally reported, confidence increased to 101.1 the best read since Sept 2015 but July revised from 97.3 to 96.7. Three thousand households across the country are surveyed each month. In general, while the level of consumer confidence is associated with consumer spending, the two do not move in tandem each and every month. There was no negative reaction to the better index in the bond and mortgage markets.

Nothing left on the schedule today. Friday’s employment report still the elephant in the room. With employment on the clock we don’t expect much improvement in the bond and mortgage markets. Even with the volatility Friday and yesterday unlikely interest rate markets will move much. Our technicals still remain in neutral levels.

PRICES @ 10:10 AM

10 yr note: -1/32 (3 bp) 1.57% unch

5 yr note: -1/32 (3 bp) 1.18% unch

2 Yr note: unch 0.81% unch

30 yr bond: -5/32 (15 bp) 2.22% unch

Libor Rates: N/A

30 yr FNMA 3.0 Sept: @9:30 103.80 -2/bp (+20 bp from 9:30 yesterday)

15 yr FNMA 3.0: @9:30 104.77 -7 bp (+9 bp from 9:30 yesterday)

30 yr GNMA 3.0: @9:30 104.70 -3 bp (+19 bp from 9:30 yesterday)

Dollar/Yen: 102.64 +0.72 yen

Dollar/Euro: $1.1153 -$0.0037

Gold: $1321.00 -$6.10

Crude Oil: $47.37 +$0.39

DJIA: 18,464.47 -38.52

NASDAQ: 5231.69 -0.64

S&P 500: 2177.84 -2.54