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FHA Loan Interest Rate Trends

November 6, 2014

106FHA mortgage loan rates are on the rise this week following upward pressure that started late last week after the Fed made an important announcement. The Fed decided to end Quantitative Easing, which is essentially a government stimulus program that invested in markets and helped keep mortgage rates lower thanks to those investments.

Last week, when the end of the program was announced, investor reaction to the news put upward pressure on mortgage loan rates in general, kicking off a trend that continued late into the week resulting in four week highs for rates by 3 November. The numbers you’ll see reported below are listed as best execution rates, but suffice it to say that mortgage loan rates across the board have been affected by current conditions.

For much of the upward trend, best execution FHA home loan rates held on at 3.5% (depending on the lender and market conditions), but this Wednesday FHA mortgage loan rates felt the upward pressure, resulting in rates breaking out of their single best execution number (3.5%) and into a range between 3.5% and 3.75%.

Best-execution rates are not available to all borrowers or from all lenders. The borrower’s FICO scores, loan repayment history and other factors will play a big part in the interest rate offered. There’s also greater variation among participating FHA lenders for rates–conventional loans don’t seem to vary as much under normal circumstances.

There may still be important movement in FHA mortgage rates this week–at the time of this writing there are still some important economic data releases. It’s likely that if the news is bad for mortgage rates, FHA rates could drift a bit higher between now and Monday.

When it comes to what to do about this interest rate news, some borrowers are wondering whether to lock or float. Floating–delaying an interest rate lock in hopes that conditions will improve–seems more risky in the short term given that we don’t know the outcome of the pending economic data releases. Investors can and often do react in knee-jerk fashion to news of this kind, and that reaction can affect rates in the short term.

Upward momentum in rates is a trend for now, and while that trend could be broken by good-for-the-rates news on Thursday and Friday, it seems like a bad idea to assume that will happen. The best advice? Ask a lot of questions and make the most informed choice you can based on what you learn.

Joe Wallace - Staff Writer

By Joe Wallace

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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