FHA Mortgage Rate Predictions | This Week | March 22, 2010

FHA interest rates closed the week relatively unchanged last week, but it was anything but a steady week.  Rates improved Monday, Tuesday and Wednesday and then sold off Thursday and Friday.

These rates continue to confound the experts.  No one forecast this 5% range to have held steady for this long.  Thursday and Friday’s sell-off might be indicative of the speed at which rates will go up–and they will eventually go back up.

Last week’s big story was the Fed meeting.  Synopsis:  Fed Funds Rate unchanged, likely to stay low for a while, and things are improving.  Notably, we have improvements in the credit markets, businesses are spending, and the recession is behind us.

That’s not to say the economy is completely fixed. There are still looming threats that could slice into consumer spending and slow down this recovery.

FHA Interest Rate Predictions

This week, we are watching two things.  The Fed’s $1.25 trillion mortgage buyback program ends at the end of the month.  All indications are that rates will rise.  The Fed’s estimates are that the program lowered rates by about 1%.  The question is how quickly the market will absorb that 1% back in the form of higher mortgage rates.

We’re also watching the news:

1. The Existing Home Sales data for February is released Tuesday, along with the Home Price Index
2. The New Home Sales data for February is released Wednesday
3. Consumer Confidence data hits Friday

Strength in any — or all three — of these reports should put pressure on mortgage rates to rise.

Add one more wildcard:  Kansas Fed President Hoenig’s scheduled speech Wednesday morning. Hoenig was the lone dissenting vote at the Fed meeting–Hoenig voted to raise rates.  Normally, Fed members stay on topic in public appearances, but it wouldn’t be unprecedented for a Fed President to speak his or her mind.

His words could lead Wall Street to rethink its position on the mortgage bond market and that could cause rates to spike Wednesday afternoon.

Mortgage rates remain volatile and are still relatively low. If you’re unsure of whether now is a good time to lock in, consider that there’s a lot more room for rates to rise than to fall right now. Especially with momentum shifting for the worse.