Interest rates had been in an ugly trend from October until just a few weeks ago. We’d seen rates rise by nearly a full 1.00%.

With the spring buying market already heating up, home affordability had definitely taken a hit over the past 4-5 months. However, it probably still made sense to buy with the long-term mortgage rate projections just making today’s mortgage rates more attractive than those of the future.

That was until today’s mortgage rates decided to improve. I’m not a huge fan of the Freddie Mac PMMS report. It is woefully delayed, publishing Thursday rates that are tallied from Monday to Wednesday. This week’s conforming rates held at 4.88%. There isn’t a direct equivalent tool for tracking FHA interest rates, but they’ve been slightly lower.

What’s notable is what’s not in the report. Namely, the trading from Wednesday and Thursday. If you had a mortgage quote from Tuesday for a rate of x.xx% paying 1 point, the market has rallied by just over a full point in the past two days. That same rate quote of x.xx% and a point should now be x.xx% and no points.

Perfect timing for home buyers that are hitting the streets in the early part of spring.

Home prices ticked up 0.7% in November.  The Federal Housing Finance Agency tracks this data and, like Case-Shiller, it runs on a two-month delay.

That is perhaps the biggest issue.  The Realtor data shows 80% of Pending Home Sales close within 60 days meaning that the home price figures are always about a full sales cycle behind.

Over a year, the data can be fairly useful.  The facts are that home prices are up and home supplies are down over the past 12 month.

There are three main reasons to buy a home today:

1. First time home buyer tax credit
2. Home prices are low
3. Mortgage rates are low

We’re inside of 90 days on the expiration of the tax credit, we’re already seeing home prices move higher, and FHA interest rates are going to rise at the termination of the Fed’s purchase program.

Homes may not be this affordable for quite some time.

Last week saw rates take a bruising after chasing all-time lows right near Thanksgiving.  The FHA interest rate was pushed higher, but still opens this week under 5%.

It is hard to keep in context how low mortgage rates are.  We went up .25% and are still below 5%.  That’s great news today.  It’s scary news into the future.

The economic data continues to point towards a slowly rising economy with sporadic pockets of bad news.   Every time that the Federal Reserve says “inflation,” rates go up .125%.

Today’s mortgage rates still sit more than 1% away from their ‘normal’ levels.  If you are looking at refinancing an FHA loan, this is a great time for it.  If you are looking at buying a home, today’s FHA interest rates make it much more affordable than it would be in a year.

This is great news.  When we look at interest rates, we track a GNMA mortgage bond.

Recently, we’ve been using the 4.5% coupon.  With rates dropping so rapidly, we’re switching over to the 4.0% coupon as that is more closely related to the security that lenders are using to set FHA interest rates.

Mortgage bonds are flat to open today.  It could get a little dicey as fears over the Dubai debacle are subsiding.  With the high quantity of securities bought during this recent flight to safety, we could have a situation where the FHA loan rate could correct pretty quickly.