FHA Mortgage, Interest Rates and Marketing

Its been a while since I have posted any rate updates.  Mainly because we have been so busy growing and keeping up with our volume.  Rates have remained very low thanks to the Federal Reserve’s purchase of mortgage back securities.

We have seen a pattern emerging of the last few months that each time the Fed starts buying Mortgage Backed 4.5% – 5.0% for FHA Fixed Rate loans making it possible for most homeowners to save money by refinancing.  We even wrote a few 4.25% rates last week (with discount points) for a few borrowers who want to lock in the absolute maximum savings while rates are low.

Week of April 20th, April 21st, April 22nd, April 23rd, and April 24th Mortgage Rate Synopsis/Forecast.

FHA 30 Year Fixed Mortgage Interest Rate: 4.5 – 5.0% depending on credit score and points paid.

Conventional 30 Year Fixed Mortgage Interest Rate: 4.25% – 5.5% depending on credit score, loan to value, transaction type and points paid.

Mortgage bonds are sitting up slightly and trying to get some momentum to help get rates back down, but have been stalling out.  If bonds can find the momentum to push mortgage rates back down before the close of the market today, we may be able to maintain the low level rates we have enjoyed lately. Otherwise we can expect a jump in mortgage interest rates.  We’ll keep watching through the day (May 14th) and see what happens with mortgage interest rates.

On May 13th mortgage bonds worsened considerably, causing interest rates to rise around .125%.  Talk of inflation had a negative impact on the market as multiple Federal Reserve members made comments about inflation becoming a bigger problem.

 Mortgage Rates have been on a roller coaster lately making it very difficult for consumers to determine when the right time to lock in their mortgage rate is.  We’ll ve watching mortgage bonds closely on May 14th, to see if there will be a reversal or if this is a new trend.   If rates worsen further on May 14th it would continue our journey to higher rates, hopefully we will see a reversal so we can see keep rates at low levels this week.

 As it stands right now mortgage interest rates are averaging the following (May 14th, 2008):

Conventional 30 Year Fixed Interest Rate: 5.875%

FHA 30 Year Fixed Interest Rate: 5.875%

VA 30 Year Fixed Interest Rate: 5.875%

There is a lot of pressure on the FHA right now to do more to help homeowners in trouble.  We are closely watching this legislation as it will make low fixed interest rates available to even more people – which is good. 

The retail sales index came in better than expected today (when removing new car sales).  This shows that consumers are still spending money which is bad for mortgage interest rates.   The fed made some comments that they are prepared to more action if needed which would mean cutting short term rates more - which would REALLY HURT MORTGAGE RATES. 

I think its very important for everyone to realize – WHEN THE FED CUTS SHORT TERM RATES, MORTGAGE RATES GET WORSE.  Rate are still near historic lowes and are not going to get any lower.  If you are hanging on out there for a lower rate, I urge you to consider locking in.  Rates will not be this good forever.

We had two chances to drive interest rates back down and neither seemed to have the effect we wanted.

First was the FOMC Meeting where the fed cut .25%.  This resulted in some very very temporary gain in the mortgage bond market but were quickly erased and fell back flat at the higher rates we settled into last week.

Second was the jobless claims report which came in better than expected and sent rates shooting upward, but has now calmed down and sunk back into the levels we were at before.

 To me this signals that we are settling into this new higher band of mortgage rates for the time being.  I don’t expect to see rates drop much below 5.875% in the coming weeks.  If things change as always I will update, but after these two missed opportunities at getting back to lower rates I think we are stuck here.

We knew it was coming.  Rates finally worsened after hanging out near historic lows for about a week.  We have seen about a .375% increase in mortgage rates in the last 48 hours.  Mortgage bonds are down about 80 basis points from yesterdays open which is driving rates UP.

Every time rates hit this low level we have clients that do not listen and try to hang on for a lower rate.  When we are sitting at historic lows and inflation fears are on everyone’s mind its just not going to get better, it can only get worse.

 Hopefully we will bounce back in the next few days to where we were!

Mortgage rates bounced around last week in a .25% range but there were no major changes.  They just kept bouncing back and forth in that range.  Hopefully we can keep some stability this week.  We remain near the lowest levels of the past 5 years so there really isn’t too much room to get better.  I have a lot of clients right now who are hanging on for “better rates”.  I just don’t think it is going to happen – but if I knew for sure I would be in Vegas making billions.

Keep an eye on the stock market, if there are any strong surges it will hurt interest rates.  Other than that we need some bad economic news this week if we are going to push down to lower levels.  I don’t think we will get any lower, I just think its a question of when they will get worse.  If we see any positive economic news or inflation talk, they will get worse and quick!  That’s the problem with being at historic lows for interest rates, they have no where to go but UP unless we see even more significant ecnomic  problems.

When the mortgage bond market opens in the morning, I’ll give an update of where we stand.  Good Luck!

The mortgage rate market was stalled most of the morning awaiting Ben Bernanke speaking this afternoon.  We’ll wait to see what kind of effect Ben Bernanke the Fed Chairman has on interest rates.   He speaks shortly at 1:00 pm eastern standard time.

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The big factor in mortgages rates on Monday, April 7th was the stock market.  If you are currently watching mortgage rates and trying to decide when to lock in, you should keep an eye on the stock market.  Monday morning the stock market started out strong pushing mortgage rates up, by 1:00 the stock market reversed and gave up most of the morning gains.  This allowed mortgage rates to drop back to the levels we saw on Friday.

Keep an eye on the stock market, without any other major economic news it will drive mortgage rates.  If the stock market is weak rates will get a little bit better, but be careful with rates near such low points the slightest favorable economic data can send them shooting upwards. 

Keep in eye out for my April 8th, 2008 AM Update for more information as we continue to watch rates through this week (April 7th, 2008).

 Economic Data for the week of April 7th, 2008

Tuesday April 8 – FOMC Meeting Minutes at 2:00pm

Thursday April 10 – Jobless Claims (first thing in the morning)

Mortgage rates ticked up a little this morning due to some volatility in the mortgage bonds market.  This may just be “Monday morning” reaction to Fridays drop and the gains the mortgage bond traders are able to take advantage of.

Every time we have hit the low level of rates we saw on Friday we see a dip shortly there after, but there is usually a window of a few days to take advantage of the rates.

FHA 30 Year Fixed: 6.0% (average)

Conventional 30 Year Fixed: 6.375% (average)

The gap between Conventional and FHA Rates continues to widen as mortgage investors lose faith in non government back loans.  If you are not working with an FHA Approved lender, you may want to consider it.