Mortgage Rate Summary 2/3/17
How Interest 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: Lower
Mortgage rates are moving lower so far today. The MBS market improve by +16 bps yesterday. This may've been enough to improve mortgage rates or fees. The market experienced moderate volatility yesterday.
Today's Rate Forecast: Lower
Jobs: Its Big Jobs Friday!
- Headline January Non-Farm Payrolls 227K vs est of 175K
- December NFP revised from 156K to 157K
- November NFP revised from 204K down to 164K
- Over the past 3 months, NFP have averaged 183K after revisions.
- The Unemployment Rate moved up from 4.7% to 4.8%.
- This was due to the Participation Rate moving up from 62.7% to 62.9% which that more people responded that they are looking for work compared to last month.
- Average Hourly Earnings did increase on a MOM basis by 0.1% but this was lower than the estimates of 0.2%.
- Average Hourly Earnings on a YOY basis dropped from 2.9%(revised to 2.7%) down to 2.5%.
- The average work week increased to 34.4 hours from 34.3 hours.
So, what does all of that mean? Well for sure it is a mixed bag. We did see much stronger NFP readings but a sizeable revision lower in November's NFP. We did also see an increase in wages but at a very slow clip.
Services: 2/3 (or more) of our economy is services (non-manufacturing) based. The January ISM reading hit 56.5 which just missed expectations of 57.0. It was the third highest reading in the last 12 months. Anything above 50 is expansionary.
Factory Orders: December U.S. Factory Orders where better than expected (1.3% vs est of 1.0%) and a nice rebound from November's -2.4%.
Geo-political: We have fresh new sanctions on Iran but the market focus on is on a possible executive order that directs the government to review the Dodd-Frank law and look for ways to pare it down.
Today's Potential Rate Volatility: High
So far today mortgage rates have experienced high volatility. Mortgage rates have moved lower today and will likely finish better for the week, but it could get a little bumpy toward the end of the day.
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.
VP of Mortgage Lending