September 18, 2014
We’ve seen recent trends in FHA mortgage loan rates towards higher numbers, but this Wednesday was a much anticipated day for the rates as investors and market watchers waited to hear the Fed made a policy announcement.
The announcement did put upward pressure on rates, but we’ve seen some important movement in them already– September 12 was the day when best execution rates for FHA mortgage loans were pushed out of the previous single number comfort zone of 3.75% and back into a range of rates between 3.75% and 4.0, best execution. This is the first time in many weeks, if not months, that we’ve seen rates for FHA mortgages (best execution) move back into the 4% zone.
On Wednesday, September 17, the range of FHA loan rates persisted, thanks to the reaction to the Fed announcement–we saw lenders repricing higher as the result of quick reaction to the Fed statement, seeming to further solidify the range between 3.75% and 4% best execution as a possible new comfort zone for FHA loan rates. The last comfort zone for FHA rates (3.75% best execution) persisted for quite some time.
It’s not certain whether this new range will be the new normal or not; market watchers say there is no way to predict which way rates are headed. That’s in the face of the higher rates today that brought 30-year fixed rate conventional loans and other mortgage rates to their highest levels in about a month and a half.
What was in the Fed announcement that influenced rates on Wednesday to levels we haven’t seen in about six weeks? It included the following as reported by Bloomberg.com,“…the Fed’s statement said the economy is expanding at a moderate pace and inflation is below its goal. It maintained a commitment to keep interest rates near zero for a “considerable time” after asset purchases are completed in October.” That alone might not sound like much to be concerned with, but investors are likely reacting more to the Fed’s allusion to a possible hike in borrowing costs when it feels the time is right.
In the wake of the Fed’s announcement, some lenders repriced higher, and some did not. However, rates are in a definite upward trend over the short term and we now see industry professionals giving advice about locking an interest rate that includes evaluating an FHA borrower’s acceptable risk for higher rates when it comes to trying to “float” and hope for improvement in the coming days. Borrowers should make the most informed choice possible when trying choose between committing to the rate or holding out for some improvement.
Here are the mortgage loan averages for the week of September 15 2014, reported here as best execution averages. The rates here assume ideal conditions including the availability of a participating lender, a borrower with outstanding FICO scores and loan repayment history, and other factors. These rates are not available to all borrowers or from all lenders. Your experience may vary depending on all, some, or none of these factors.
- 30-year Fixed Rate Mortgages: 4.25% or higher
- FHA Mortgage Rates: Between 3.75%-4.0% (or higher depending on the lender)
- 15-year Fixed Rate Mortgages: 3.375% to 3.5% or higher
- Five-year Adjustable Rate Mortgages: Between 3.0% and 3.50% depending on the lender
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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