CHM Blog

Real Estate Market Insider March 14, 2022

March 14th, 2022 3:18 PM by Richard Sardella MLO.100007700/NMLS 233568

Rates At a Glance
Mortgage Rates
Currently Trending
7 Day Mortgage
Rate Forecast
This Week's
Potential Volatility



(by Sigma Research)
Real Estate Report

Federal Reserve Ends MBS Purchase Program:

On Friday, March 11th, the Federal Reserve placed their last remaining order to purchase Mortgage Backed Securities (MBS) as part of their emergency Quantitative Easing program.

This was a program where the Federal Reserve Bank of New York would purchase both U.S. Treasuries notes and MBS bonds. They did this to create an increase demand for these items which, in turn, caused interest rates (controlled by Treasuries) and mortgage rates (controlled by MBS) to be much lower than they otherwise would be under free market conditions.

This marks the end of the 4th time in modern history that The Federal Reserve has stepped in to control interest rates by buying notes and bonds.

The first time was called QE 1 and ran from December 2008 to March 2010 in reaction to the big financial collapse.

The second time was called QE2 and ran from November 2010 to June 2011.

The third time ran was called QE3 and ran from September 2012 to December 2013.

The fourth time was called the March 2020 Coronavirus Bond Buying Program and ran from March 2020 to March 2022.

The Federal Reserve Open Market Committee (FOMC) will have their Fed meeting this Wednesday at 2 pm ET where they are presumed to announce an interest rate hike which is only applicable to their Fed Funds Rate. Mortgage rates are controlled by the open markets, the intersection of supply and demand of MBS. Since Fed is now out of the game of buying MBS, it is presumed that mortgage rates will increase as a result.

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.  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: Higher

Mortgage rates are moving higher today. The MBS market worsened by -119 bps last week. This was enough to increase mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Higher

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

1) Central Banks: We get key interest rate decisions and policy statements from 3 out of the worlds top 5 central banks (U.S., Japan and Great Brittan). Our own Federal Reserve will get the most weight from bond traders. Now that the Fed has stopped buying MBS (as of last Friday), we will be very keen to learn about their QT (balance sheet reduction) plans. While the market is expecting a series of gradual 1/4 point rate hikes at each meeting, their is no guaranty that they wont do more at this meeting.

2) Geopolitical: Even though Florida has declared Covid over, it is still a major disruptive factor as China has locked down over 17M which has shut down major factories and ports and will disrupt exports significantly. Russia/Ukraine will continue to be a big factor in pricing as well.

3) Inflation: We had the highest inflation level in history for the CPI measure last week. This week, we get the frontend of that with PPI which will portend what the next round of CPI data will look like.

This Week's Potential Volatility: High

This morning heavy pressure on rates. Volatility is high as geopolitics and inflation fight for market dominance.

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.

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on March 14th, 2022 3:18 PM



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