June 17, 2015
It’s been a tricky week for mortgage loan rates in general; rates seemed to be in a “defensive” position ahead of the highly anticipated Fed announcement which happened today–that announcement had major power to influence rates higher or lower depending on the contents of the statement and investor reaction to it. So what happened with rates today?
According to several sources, certain markets that influence mortgage rates were weak in the morning, which sent some lenders to adjust their rates accordingly. Once the Fed had made its eagerly awaited announcement, rates began moving back the other way. Why?
The Fed could have announced an interest rate hike today, which can and often does (when it occurs) have a negative effect on mortgage rates. But instead, the Fed declared that while the economy is moving forward, there wasn’t enough justification for an interest rate increase.
As a result of investor reaction to that news, best execution rates for 30-year fixed rate conventional mortgage loans swung closer to 4.0% than they’ve been in many days. Some financial institutions may be offering 4.125% best execution, but with lower closing costs. Others may offer 4.0%, depending on the lender and borrower financial qualifications.
The FHA mortgage loan interest rate picture, best execution, hasn’t really changed–FHA mortgage loan interest rates are still in their 3.75% comfort zone (best execution, as always) though FHA loan applicants may find greater variation among participating lenders than with 30-year fixed rate conventional mortgages. When we discuss “best execution rates” keep in mind that ideal situations are assumed–a borrower with outstanding FICO scores and other financial qualifications, plus the availability of a participating lender. Your experience may vary depending on a variety of factors.
What is ahead for mortgage loan rates in general? Don’t look at today’s activity as any sort of indication as to which way rates could move–they began weaker today and ended up stronger. So there was a tug of war happening that will take a few days to shake out before its possible to identify some kind of short-term or mid-term trends. The common wisdom among market watcher seems to be that floating in the current rate environment is quite risky.
“Floating” refers to holding off on a mortgage loan interest rate lock commitment in hopes that rates might go lower in the short term future. Locking refers to making a commitment with your lender as to the interest rate on your mortgage loan subject to a time limit agreed upon by you and the lender. Right now, much of the industry pro advice you may get could emphasize the word “lock”.
Do you have questions about FHA home loans? Ask us in the comments section.
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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