CHM Blog

Rates: No news is no news

Move right on along. Nothing to see here. As reported by Realtor.com’s Keith Griffin, Federal Reserve policymakers left the central bank’s key interest rate unchanged.

“The decision to leave the federal funds rate unchanged was widely expected, and will have little immediate impact on mortgage rates for homebuyers,” says Griffin, who adds that the Fed did not issue any updates to its summary of economic projections at its latest meeting. This was the first meeting of the new presidential term, and offered no insights that could move the markets that ultimately determine mortgage rates.

Fed Chair Jerome Powell emphasized the central bank’s patient approach, saying that economic indicators signal no need to be in a hurry to adjust their policy stance. This comes as no surprise, as the financial markets that dictate mortgage rates were virtually unchanged on the same day Powell’s press conference concluded.

“The ongoing strength of the labor market gives the Fed an opportunity to be patient as it navigates risks on both the employment and inflation sides of its dual mandate,” says Realtor.com's Chief Economist Danielle Hale.

Powell did indicate that the Fed is monitoring the impact of higher mortgage rates on the housing market. But he sees it as just one factor they are considering as they evaluate the appropriate policy stance going forward. The Fed sets short-term interest rates, and while it does not directly control mortgage rates, those rates tend to move in tandem with the yields on long-term bonds, which are dependent on investor expectations about the future state of the economy, government deficits, and Fed policy in the near future. Griffin explains, “For that reason, mortgage rates have risen by nearly a percentage point since the Fed began cutting its policy rate in September, despite the cuts themselves totaling a full point.”

It is generally believed that mortgage rates have risen primarily because inflation has failed to soften as quickly as expected, while job growth remained strong, reducing expectations that the Fed will cut as quickly and deeply as initially hoped.

How does this all trickle down for prospective homebuyers? Griffin says the Fed’s cautious approach likely means overall stability for mortgage rates as the spring selling season approaches—although that stability may be at a higher level than many borrowers would prefer.

While mortgage rates move marginally on a daily basis in response to new economic data and other news that affects financial markets, barring any big surprises, they could well remain close to their current elevated levels as spring approaches. “This relative stability for mortgage rates would offer a better planning environment for homebuyers, allowing them to determine their price range and move ahead with a purchase without playing a waiting game on rates,” predicts Griffin.

Hale adds, “More home building—a factor beyond the Fed’s control and an issue that the Trump administration has called attention to—is not only necessary to address the significant housing shortage that has opened up over the last decade, it would likely accelerate the pace at which shelter inflation normalizes. Put simply, building more homes would not only fill an important consumer need, it would help get inflation back on track.”

Realtor, TBWS

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 getting some support today. The MBS market improved by +21 bps last week. This may have been enough to decrease mortgage rates or fees. The market experienced high volatility last 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) Jobs, 2) Tariffs, 3) ISMs.

1) Jobs: We will get a ton of job and wage related data this week leading up to Big Jobs Friday. These include ISMs, ADP, JOLTS, Challenger Job Cuts, Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings and more. The bond market will be very sensitive to this data.

2) Tariffs: The Tariffs on Canada and Mexico were announced Saturday and will officially go into effect in less than 24 hours.

3) ISMs: As far as domestic economic data outside of Jobs, ISM Manufacturing and ISM Services will get the most attention as bond traders will focus on Prices Paid and Employment components.

Bonus Central Banks: The Bank of England is expected to cut by 25BPS and we have several Talking Feds this week which will be very important.

This Week's Potential Volatility: High

This morning markets are getting a boost on tariff fears. Volatility has started high and will likely remain that way.

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.

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.

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.

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