November 9th, 2020 10:54 AM by Richard Sardella MLO.100007700/NMLS 233568
Historic low rates mean mortgage activity continues to boom
The mortgage and refinance boom isn't likely to dip any time soon. According to the Mortgage Bankers Association Weekly Mortgage Application Survey, there was a 3.8% increase in mortgage applications on an adjusted basis from the previous week, with refinance activity continuing to fuel the influx of applications.
"The Refinance Index increased by 6% and was 88% higher than the same week one year ago," said National Mortgage Professionals' Navi Persaud. "The seasonally adjusted Purchase Index dipped 1% and was down 3% on an unadjusted basis. That being said, purchase activity is still 25% higher than in the same period in 2019."
Joel Kan, MBA's associate vice president of Economic and Industry Forecasting, agrees that rates continue to hover at record lows this fall. "The drop in rates spurred an uptick in demand for refinances," he says. "Activity increased over 6 percent, with borrowers notably seeking conventional and government loans.
After a solid stretch of purchase applications growth, he says activity decreased for the fifth time in six weeks, but was still over 25 percent higher than a year ago, and has increased year-over-year for six straight months. 2020 continues to be a strong year for the housing market.
Source: NMP |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: Higher
Rates are trending higher this morning on high volatility. Last week the MBS market improved by +43bps. This was enough to improve mortgage rates or fees.
This Week's Rate Forecast: Higher
Three Things: These are the three areas that have the greatest ability to move rates this week: 1) Geopolitical, 2) Coronavirus, and 3) Central Bank
1) Geopolitical: It's another week, and the markets will continue to be impacted by election expectations. While the media outlets have crowned Biden as the winner, it's very important to note (from a market perspective) that there is still a great measure of uncertainty related to the Presidential election. The last election took 37 days to have the results certified by the states and the federal government. That has NOT happened yet, and the results of this election will be litigated most likely for longer than the last one, so while the odds certainly point to one candidate over the other, the uncertainty will remain a driving force in pricing. Other factors include the likelihood of any type of stimulus package being passed at all before late January, who the next House Speaker is, who the next Treasury Secretary is...etc.
2) Coronavirus: Nationally and Globally, the number of confirmed cases of Covid 19 continue to reach new records. However, this morning's news of Phizer's Novovax being over 90% effective is a game-changer for the economic outlook.
3) Central Bank: We get key speeches from our Fed Chair Powell, the ECB Pres Lagarde, and BofE Gov Bailey. We also get interest rate and policy statements from Mexico and New Zealand.
Treasury Dump: Here is this week's Treasury Schedule:
This Week's Potential Volatility: High
Rate volatility is very high so far today! The very positive vaccine news denoted above is helping to push rates and the stock market higher. Markets were taken aback about the vaccine's effectiveness, which is very good for the economy and helping to push rates higher. Look for continued volatility through today and the rest of the week.
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 27 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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