May 23, 2016
Mortgage rates closed out the week sharply higher, moving upwards on Wednesday after the release of Fed minutes which indicate that a June or July interest rate hike by the Fed is a possibility.
Since Wednesday there was a bit of recovery, but rates have held at the higher numbers and it’s possible we’ll see the rates listed here persist unless there is further recovery–something that may not be as likely if investors are jittery about a possible interest rate increase soon.
The Fed raising interest rates doesn’t mean they are directly adjusting mortgage loan interest rates, but investor reaction to the Fed’s actions can and likely will have some kind of reciprocal effect even if it’s just in the short term.
At the time of this writing, 30-year fixed rate conventional mortgages have left their previous, lower best execution range for a single number, 3.75% best execution. FHA mortgage loan rates, which can be slower to adjust than their conventional counterparts, are still in a best execution range between 3.25% and 3.5%.
That number is likely to change if continued upward movement happens–we could see FHA mortgage rates move out of the current range into a single number–3.5% or a new range with 3.5% at the bottom end of the range, depending on circumstances.
Some market watchers have noted that in the past, the kind of rate hike situation we’re facing now with the Fed could have added consequences that add up to higher mortgage loan interest rates, but it will take time for those factors to work.
Borrowers who do not have a high degree of risk tolerance but have not yet made a mortgage loan interest rate commitment with the lender should have a discussion with their loan officer and get some good advice on what to do, especially if closing day is 60 days away or less.
Floating, or holding off on a mortgage rate lock commitment with your lender in hopes that rates may go lower, is never risk free. In the current mortgage rate environment you may find that risk to be elevated depending on investor reaction to more news about a possible Fed rate hike or other economic data unrelated to that issue.
Make the most informed decision you can about locking or floating before committing; an informed borrower is much happier with the results of their choices.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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