Mortgage interest rates are currently at a nearly three-year low, causing a surge in refinance applications and a positive outlook for homebuyers shopping in the upcoming fall market. I invited my colleague Louis Schornstein from Prime Time Mortgage Corp. to break down some of the factors that go into the rise and fall of rates on a daily basis.

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 move 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.

Three areas that currently have the greatest ability to move mortgage rates are:

Trade War: The U.S./China trade war continues to be the primary focus of bond traders as we continue to approach the September 1st deadline for the new round of 10% tariffs on $300B worth of Chinese goods. Last week focused on the Dollar-Yuan relationship, and that will continue to be in the spotlight. The geopolitical situation in Hong Kong is also in focus.

Domestic: Last week we received the Producer Price Index and this week we get the more important Consumer Price Index as a measure of the consumer side of inflation. We also get a critical retail sales report. All of these will factor into mortgage interest rates.

Across the Pond: Germany will release a very important GDP report that will get a lot of attention, particularly after Great Britain showed a negative GDP on a month-over-month basis last week. From China, we get retail sales and industrial production reports.

For more information on 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.

If you want to take advantage of the current low interest rates, contact me today to start your home search.