Mortgage loan interest rates dipped to incredible lows, with FHA mortgage rates falling below three percent last week.
However, this week mortgage loan interest rates are moving upwards due to multiple factors having to do with bond markets, mortgage-backed securities, etc.
What does the average borrower need to know?
Last week we discussed the possibility that rates could move higher at any time. That discussion is now playing itself out with FHA mortgage loan interest rates now back above the three percent zone at a reported 3.25% best-scenario rate assuming an ideal borrower with outstanding FICO scores and other financial qualifications.
Those who were ready to make an interest rate lock commitment with their lender but instead decided to “float” rather than lock in a mortgage loan interest rate definitely lost the bet on lower interest rates.
Potential FHA loan applicants not yet ready to apply or commit? Those people lost nothing at the end of the day. It’s riskier to apply for a major line of credit before you are really ready, and playing it safe in a volatile mortgage rate environment makes sense.
Bond market conditions have served to put pressure on mortgage rates and another factor–too much supply in the mortgage markets making the investing situation there more complicated adds a layer of complexity to the situation that is far beyond the typical borrower’s interest or experience.
When you listen to the experts talk about these issues, you’ll hear about bonds, mortgage-backed securities, supply and demand, and more.
Do you really need to know how all that works in order to make the right decision about your home loan or refinance? No.
But what you really need to know is this; rates are going to change. There WILL be a market correction from the low, sub-three percent rates we had last week.
The move higher might not even be part of the “correction” technically speaking–it’s likely there isn’t enough information yet to know whether the upward movement we’re seeing now is a temporary thing, part of the market’s volatility…or not.
The basic idea is still true; if you are not ready for a loan, don’t rush into one. If you are ready to commit, ask your lender for advice about how to proceed with current conditions in mind.
Rushing into any major financial commitment is a bad idea. Proceed with caution, but if you are ready, do proceed.