That marks two weeks in a row with considerable improvement and two weeks in a row where rates dropped due to “safe haven” buying.

Safe haven buying, which we’ve been covering a lot, is when investors sense market risk and move their money towards less risky investments.  Since Fannie Mae and Freddie Mac mortgage bonds are backed by the U.S. government, they are inherently less risky investments.

When uncertainty prevails in the markets, foreign or domestic, a outcome is that the FHA mortgage rate will dip lower.  Last week had uncertainty, both foreign and domestic.

Early in the week, virtually all air travel in and out of Europe was grounded as Iceland’s volcanoes spewed ash into the air.   Since plane engines don’t fare that well when covered in ash, it grounded planes.  Planes aren’t just for vacations.  Goods, especially perishables, are stuck in warehouses around the globe unable to reach a market.

Domestically, we had “a little bit” of news as well.  Friday, the SEC announced fraud charges against Goldman Sachs.  This sent Wall Street into a tailspin on Friday and the move from stocks to bonds pushed rates lower again.

This Week’s FHA Interest Rate Predictions

We have a very light economic calendar this week and the news doesn’t look to be the biggest element moving rates.  On tap for Thursday we have:

1. Initial Jobless Claims : Important vis-a-vis broader employment figures. A strong number could push rates up.
2. Existing Home Sales : Housing remains a key part of the economy. Strong sales are expected because of the tax credit.
3. Producer Price Index : A “Cost of Living” index of business. A weak reading is expected because inflation is low.

The bigger risk to the FHA loan rate this week is a reversal of this trend of safe haven buying.  It is what has pushed rates down over the past 10-day rally.  When it reverses, so too will mortgage rates.

If you’re evaluating a lock or float decision, rates have significantly more room to go higher rather than lower.

The major concerns are tied to the current mess in the EU and worries of how our federal debt will impact rates.  The best time to lock a conventional or FHA mortgage rate last week was Tuesday morning.

Predictions for FHA Mortgage Rates This Week

This week, markets should remain volatile. There’s a large set of economic data due for release, plus trading volume will thin as the week goes on because markets are closed Friday for Good Friday.

Coincidentally, Friday is also the day that the March jobs report is released.  Growth is forecasted for this report, a net gain of 187,000 in March.  This is a large number as compared to last month’s net loss of 36,000 job. However, analysts are already dismissing March’s numbers as skewed by both the bad storms of February, and the temporary hiring of Census workers.

In most months, major job growth would be bad for mortgage rates.  This month, that won’t be the case. It will take a figure north of 200,000 to cause rates to rise and the higher the actual number, the more that rates will respond.

Also this week, on Wednesday, the Federal Reserve’s $1.25 trillion program to support mortgage markets sunsets. Fed insiders estimate that the program dropped rates 1 percent since its inception in 2008. It’s reasonable that FHA mortgage rates will rise after its end.

The FOMC has held the Fed Funds Rate inside of a target range of .000-.250 percent since December 16, 2008, and the voting members of the Fed are anticipated to vote “no change” again today.

However, no change to the Fed Funds Rate doesn’t always mean no change in FHA interest rates. This is simply because the Fed Funds Rate is a different interest rate from the rates home buyers get from a loan officer.

• Fed Funds Rate : Short-term rate at which banks borrow from other banks
• FHA Mortgage Rate: Long-term rate of interest a homeowner pays on a mortgage .

FHA mortgage rates are a lot more responsive to what the Fed says as compared to what the Fed does.

After each FOMC meeting, Fed Chairman Ben Bernanke & Co issue a formal announcement to the markets. At roughly 400 words, the statement is a brief commentary around the strengths, weaknesses, and threats for the U.S. economy.

Wall Street watches the statement with great interest and this is the reason interest rates tend to be volatile on the days of an FOMC adjournment. One mention of a word like “inflation” and traders rush to dump their mortgage bond positions.

Inflation is the enemy of interest rates.

After the Fed’s last meeting in January, it told us that the economy had “weakened further”, led by steep declines both in housing and employment. Global demand was off, too. The negative tone of the Fed’s statement caused mortgage rates to fall to near an all-time low.

This month, expect a less gloomy message.

Since January, there has been a modest rebound in housing, employment appears more stable, and Retail Sales just posted huge gains. If the Fed alludes to improvement in any or all three, mortgage rates will more than likely reverse and zoom higher.

We can’t know very well what the Fed will say so if you’re floating a mortgage rate and wondering whether to lock, the safe approach would be to do it today prior to 2:15 PM ET.

Last week was very light on economic data.  This week is the exact opposite.

FHA Loan Rate Predictions | This Week

Expect volatility.  Here is just the economic data on tap:

• Monday : Industrial Production and Home Builder Index
• Tuesday : Housing Starts and Building Permits
• Wednesday: Consumer Confidence
• Thursday : Producer Price Index and Initial Jobless Claims
• Friday : Consumer Price Index and Continuing Jobless Claims

Beyond that, we have the Federal Open Market Committee meeting on Tuesday.

We don’t expect changes to the Fed Funds Rate, but the post-meeting press release is nearly always the start of a volatile afternoon.  Talk of economic strength will push up stocks and drive mortgage rates higher.  Talk of economic weakness will push stocks lower and typically pull loan rates a bit lower as well.  The issue is that there is a lot of room for rates to go up and not a lot of room for them to go lower.

Light volume and steady gains all week.  Then the better-than-expected jobs report on Friday took back much of the week’s gains.

Rates were best Thursday afternoon, but it was still the second consecutive week in which the FHA interest rate fell.

FHA Loan Rate Predictions For This Week

More volatility.

There are not many economic reports with just Consumer Confidence and Retail Sales due out.  A status quo for rates would be great.  Any change is significantly more likely to drive rates up than push them down.

The ticking clocks for this week are two-fold and completely outside of normal mortgage rate factors:

• The end of the Fed’s support of the mortgage bond market
• Potential resolution on the EU / Greece bailout discussions

We’ve had almost all of $1.25T supporting mortgage rates for the past year.  That’s ending.  The Fed has been a buyer of epic proportion.  Rates will go up if no one else has an appetite for that many mortgage bond investments.

We’ve had a huge influx of foreign money in the past few weeks.  It’s helped push the FHA mortgage rate lower and stocks higher in the same week.  That’s not normal.  That’s because foreign investors felt the US was safer than anywhere else.  If the Greece issue finds resolution, expect rates to jump.

The economic data was negative:

• Consumer Confidence posted 16% short of expectations
• New Home Sales posted 13% short of expectations
• Initial Jobless Claims were higher than expected

Rates didn’t go as low as they could have.  Fed Chairman Ben Bernanke’s semi-annual statements to Congress eased concerns that the monetary policy would get too tight, too quick.  Stocks responded well at the end of the week as Bernanke confirmed that the Fed Funds Rate will stay low for an extended period of time and this took money out of the bond market.

This Week’s FHA Interest Rate Predictions

Friday’s Non-Farm Payrolls report, the “Jobs Report,” will likely be the big driver.  The expectation is that 30,000 jobs were lost in February.  A higher number will drive rates lower.  A lower number will drive the FHA loan rate higher.

We also have inflation data, notably the PCE, and the Fed’s Beige book on tap.

The FHA mortgage rates look great today, but this week has some highly influential reports that could cause dramatic swings by the week’s end.

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.

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.

All bets are off.  There are some things that “always” increase rates.  Last week, we saw strong corporate earnings, housing appears stable, and the Federal Reserve continues their upbeat tone.

Those things all cause rates to go up.  Yet, the FHA interest rate dipped for a 4th consecutive week.

Why?  Because every other economy in the globe appears worse off than ours right now.  Bad news kept filtering in, starting with the UK banks the week prior, China tightened its money supply, and pick an EU country, it’s in trouble.

The FHA loan rate is strongly tied to where global investors wish to park their money.  For the past two weeks, the U.S. has seemed much safer than anywhere else.  When investors park their money here, our mortgage rates go down.

Looking forward to this week’s FHA mortgage rate predictions, there is almost no economic data.  If foreign investors deem the U.S. safer than elsewhere, FHA rates stay low.  If foreign investors think someone else offers a risk/reward they like, the sound will be their money sucking out of the bond market and the consequence will be a significant jump in mortgage rates.

If you are currently considering whether to lock or float a laon, the trend continues to point towards higher rates down the road.