We start this week with nearly all FHA borrowers looking at sub-5% rates, no points.

If you are seeing any of the following, click the chat button, we can help:

• 5% or higher rates
• Points
• Lender costs over $1,000

The FHA loan rate has been helped, significantly, by the mess in Greece and Europe.  Investors everywhere have pulled money out of the eurozone and plugged it into our markets.  More foreign money = lower home mortgage rates.

That’s good.  But that could end at any moment.  That’s risk #1.

Risk #2 to mortgage rates this week is the economic calendar.  It is loaded.

• Housing:  Home Builder Housing Market Index, Building Permits, Housing Starts
• Inflation:  PPI & CPI

Oh, and it is also the week of the release of the Fed minutes from the April meeting.  That’s always a market mover and happens in addition to some other highly influential reports.

FHA interest rates have been here before.  Never in history have they stayed here for long.  If you’re undecided whether to lock or float, you stand to gain very little by waiting, but could lose .5% in the blink of an eye.

The biggest stories of last week were actually non-stories.

First, the ash cloud from Iceland’s Eyjafjallajökull volcano dissipated, allowing warehouses to move inventory, airlines to move people, and businesses to move product.  In addition, Greece moved closer to securing emergency funding that will help it stave off default.

When these two issues were threats earlier in the month, mortgage bonds rallied on safe haven buying, driving rates down. As the threats lessened over the course of last week, however, mortgage bonds sold off and mortgage rates rose.

By contrast, this week features lots of stories. Economic data will be at the forefront, as will the Federal Reserve which meets for one of its 8 scheduled meetings of the year.

• Monday : Greece is expected to announce an aid package
• Tuesday : Case-Shiller Index reports on home values from February
• Wednesday : Fed adjourns from its 2-day meeting
• Thursday : Initial Unemployment Claims are released
• Friday : GDP and consumer confidence numbers are released

Furthermore, Wall Street will have its eye on the Senate’s questioning of key Goldman Sachs employees in the wake of the SEC’s fraud charge.

In general, news that’s “good” for the U.S. economy will be bad for mortgage rates, and vice verse.  And with mortgage rates changing as quickly as they have been, rates could really rise in a hurry.

The best defense against rising mortgage rates is to execute a rate lock. If you’re nervous about rates moving higher, call your loan officer and execute your rate lock today.

The Fed wrapped up its $1.25T mortgage bond purchase program at the end of March and FHA loan rates had an absolutely miserable week to end March.

Last week, the trend reversed and mortgage bonds made up two-thirds of the prior week’s losses.  Both conventional and FHA interest rates clawed back in a rather surprising rate rally.

There wasn’t much economic data, but Greece stepped in and filled the news.  If you haven’t been following this story, it’s worth it.  The Greek Parliament makes the US Congress seem not as childish.

Faced with a mountain of debt and a series of awful policy decisions, Greece has been spending much of their time complaining about how the rest of the EU is nagging them.

Yeah, that will happen when you lie about your budget and sell your sovereign debt throughout the Eurozone.  The uncertainty overseas brought investor money into the US pushing the FHA mortgage rates lower in spite of a flood of reports that revealed a US economy that continues to get stronger.

FHA Interest Rate Predictions – This Week

Loaded domestic calendar + continued Greek mess = Volatility.

Wednesday to Friday includes Consumer Price Index, Retail Sales, Consumer Confidence and Housing Starts.

Continued economic strength should mean higher rates.   Resolution in Greece should mean higher rates.

If both occur at the same time, watch out.  Rates have a lot of room to jump higher and not much room to move lower.

This week, locking in before Wednesday may be your safest, near-term rate locking strategy.

This is a widely anticipated release that follows every meeting.  The press release is typically around 500-600 words and the minutes are often 5,000-6,000.  They’re ten times as long and often ten times as influential.

FHA mortgage rates rallied, but could have gone the other way just as easily.

Wall Street was looking for clues and here’s what they found:  the Fed is less concerned about inflation than they’ve stated in other recent releases.

That’s big.  Inflation is the enemy of mortgage rates.  Low inflation leads to lower FHA loan rates.

The economy is recovering.  This is the new normal.  It’s not going to be hyper-growth fueled by hyper-leverage.   Of note for first time home buyers, when unemployment falls, both rates and home prices will rise.  If you’re looking for that once-in-a-lifetime opportunity, the window to act is closing.  Rapidly.

Hot economic data, a holiday-shortened week, and the end of the $1.25T Federal Reserve purchase program all contributed.

The FHA interest rate hit its highest levels since late-December.

Jobs move economies.  They also move mortgage rates.  Last week, the economy saw some very positive news related to jobs and mortgage rates lost a bit:

1. “Temporary Employment” — a leading jobs indicator — is up 313,000 in the last 6 months
2. The average work-week and factory overtime both rose in March — a sign that hiring should increase soon

FHA Loan Rate Predictions – This Week

This could be another crazy week.

First, the Fed is in an emergency meeting today to review the Discount Rate policy.  The market is on edge waiting for results.

Second, we’re in a really odd spot and technical trading patterns could take over mortgage rate direction for a few days and the influence on the FHA loan rate could be staggering.

Unlike fundamental trading in which markets move on data and projections, technical trading is how markets move based on patterns over time. The two methods co-exist on Wall Street but, occasionally, technical forces can be pronounced, leading markets to lurch up or down.  This week may be one of those times.

Mortgage pricing is far below its 200-day moving average, resting slightly north of a key support level. If pricing worsens this week and bonds fall below the support level, mortgage rates could easily tack on quarter-percents or more per day until the market refinds its balance.

Overall, it’s a week you don’t want your rate to be floating.   Sure, rates could improve, but there’s a lot more room for them to worsen.

When is the best time to buy a home?  If housing prices were to jump a whopping 5% in just a few months, it wouldn’t be as expensive as getting a 6% rate instead of a 5% rate.

Example:  If a home jumped from $100,000 to $105,000, the payment would go up somewhere around $25-30.  If the home priced stayed steady at $100,000, but rates jumped from 5% to 6%, the increase in payment would be more than double at just over $60 extra dollars per month.

The FHA mortgage rates, not prices, have been driving this affordability.

So, when’s it going to end?

Watch inflation.   Mortgage rates are highly responsive to inflation.

By definition, inflation is when a currency loses its value; when what used to cost $2.00 now costs $2.15. As consumers, we perceive inflation as goods becoming more expensive.  However, it’s not that goods are more expensive, per se. It’s that the dollars used to buy them are worth less.

This is a big deal to mortgage rates because mortgage bonds are denominated, bought, and sold in U.S. dollars.  As the dollar loses value to inflation, therefore, so does the value of every mortgage bond in existence. When bonds lose their value, investors don’t want them and bond prices fall.  Mortgage rates move opposite of bond prices.

Prices down, rates up.

In today’s market, the relationship between inflation and mortgage rates is helping home buyers. The Cost of Living made its smallest annual gain in 6 years last month and the Fed has repeatedly said that inflation will stay low for some time. The combination is driving investors to buy mortgage bonds which, in turn, is suppresses rates.

So long as it lasts, the cost of homeownership will remain relatively low. Combined with the expiring tax credit, these FHA interest rates have never been lower.

The official report is the “Non-Farm Payrolls” report and it is one of the most widely watched economic indicators.  Wall Street watches this report and it is usually a driver for some of the most volatile days of the year.

Tomorrow at 8:30 Eastern, we start what will likely be a volatile day.   Expectations are for a net job loss of around 30,000.  More might push the FHA loan rate a little lower, anything less could send rates much higher very fast.

Jobs drive the economic recovery.  Employed Americans spend more and default on mortgages less.  Positive readings on the job market draws money out of mortgage bonds and into stocks.  When that happens, mortgage rates go higher.

Mortgage rates hit the streets around 9:30 EST so expect tomorrow’s rate sheets to reflect the results of the jobs report.  Today’s rates are incredible and have the potential to jump much higher with only a slightly better than expected result.

It was the single worst sell-off in any week since late last year.

The Federal Reserve played two big parts in the rates jumping.  First, the January meeting minutes from the Fed meeting revealed a significantly more optimistic Fed than we saw in the brief press release that followed the meeting.  Second, and largely unexpected, the Fed raised the Discount Rate to 0.75%.   Mortgage rates do okay in times of economic troubles.  These statements and ensuing actions by the Fed indicate that better times, and higher FHA loan rates, are coming.

The Fed Funds Rate, and the Prime Rate, should remain the same for the near future, but the Fed clearly drew a line in the sand:  The economy is healthy enough where the loose monetary policy is coming to an end.

News for This Week’s FHA Mortgage Rate Predictions

This is a big news week:

• Tuesday : Case-Shiller Home Price Index, Consumer Confidence
• Wednesday : New Home Sales
• Thursday : FHFA Home Price Index, Initial Jobless Claims
• Friday : Existing Home Sales, Personal Consumption Expenditures

Even after last week’s big sell-off, mortgage rates still have enough room to jump an extra .25% without very much work at all.

If you’ve been trying to perfectly time the bottom of mortgage rates, you missed it.   At this point, the best time to get an FHA mortgage is now, not later.  We still have a .5% increase to the UFMIP hitting in just 40-ish days.  No matter how you look at it, unless mortgage rates dip significantly, an FHA home loan approval looks to be more expensive after April 5th.

Yesterday’s release of the Federal Reserve Minutes from the January meeting sent mortgage rates higher.

The release is a very detailed follow-up document that expands greatly on what was stated in the brief post-meeting press release.  The Fed Minutes outline the debates and dissenting opinions which is a more thorough view than just the summary statements of the press release.  Yesterday, Wall Street took a look at the debates and didn’t like what they were seeing.

Specifically, they reacted to:

1. Confirmation that the mortgage bond purchase program will end March 31, 2010
2. To tighten monetary policy, the Fed intends to raise the Fed Funds Rate
3. Consumer spending is improving

These are all great economic signs.  They are not good for mortgage rates.  The last part of the Fed’s comments is what really hurt the bond market:  “higher medium-term inflation.”  Inflation hurts bonds which in turns hurts mortgage rates.

This growing Fed optimism is great except for two things:  the FHA interest rate is rising and so too will home prices.   Stronger economies push both of those figures higher.

If you are looking at a home purchase or refinance, it might be wise to push your time frame up.   Rates are likely to continue to rise after March 31st and will likely rise in these next 40 days as well.

Mortgage bonds had rallied so much in the past few weeks that some natural profit-taking was to blame and the Greece issue appears to have some potential rescue efforts in the works.

This week’s FHA mortgage rate predictions are back to basics:  domestic news.   The calendar is loaded starting on Wednesday.

We’ll see:

1. Housing Starts and Building Permits (Wednesday)
2. The release of the last month’s FOMC Minutes (Wednesday)
3. Business and consumer inflation figures (Thursday and Friday)

Housing starts could be soft as weather was brutal across the country last month.  Keep an eye on permits.  Weather delays a start, but builder optimism is what triggers the permit.

The FOMC Minutes are significantly more involved than the simple press release after the meeting.  Wall Street acts on what it thinks that the Fed is thinking.  That guessing game resumes when the minutes hit later this week.

Inflation could move FHA loan rates on Thursday and Friday.  Bonds hate inflation and a hotter-than-expected reading could cause interest rates to jump.

If you know you are likely to need to lock an FHA mortgage this week, the odds favor locking before the landslide of data hits.  Rates have a little room to go lower and a lot of room to go higher.