Question by Brian: Educated guesses about when the FHA 30yr fixed rate will drop and how much?
I’m a first time home buyer and I was just preapproved for an FHA loan with a 6.5% rate. Three months ago I was approved for a conventional loan at 6.25%. I’m just wondering when analysists are predicting rates to drop?
Best answer:
Answer by Natalia
not soon the rates are going to go up for the next year unless the government lowers them again
Add your own answer in the comments!
I think the rates are more likely to go up than to go down. If they do go down it will be very minor. The fed had really messed up the economy with low interests and people are noticing it more and more and likely the rates will start going up.
You have two major factors against you. One, your in an election season, meaning anything can and will happen. Two, and more importantly, fannie and freddie need to play themselves out. If they need to access the line of credit granted by the government, you better expect rates to go up, they have no other way to make money as they certainly cannot sell stock. You really need to stop worrying about rate. A mortgage and a home is not about rate, it’s about rate of return on an investment. You rate does not help you buy a car, or get a credit card. At this juncture, I’d stay right at 6.5%, a little higher rate is only going to cost you 30-50 a month, which should help your tax write off at the end of the year. And all of us are going to need it, you probably keep hearing about all of these government bailouts…….well who will eventually pay the tab on this? You, me and all the other tax paying americans, you may need all the writeoffs you can get. Take the 6.5 as this is not the market to play chicken with, pay your mortgage down to where your not paying mortgage insurance (if your over 80LTV, your probably paying at least 1-3k upfront mortgage insurance) and hopefully you can refi to a 15 year at a nice low rate and have the home paid off by the time your 50-55. Good luck
They will not be dropping. The last time the fed met, they didn’t change rates. The next time, they may be increasing rates. THere is a little thing called inflation. To control inflation, the fed increases rates.
Unless we see oil prices drop big time, interest rates will continue to increase.
I wonder why you didn’t buy 3 months ago. You waited, now it will cost you. Wait more, and it will cost you more. 6.5% is a great rate. I purchased my first home in 1986 with a 10.5% FHA loan. And was on top of the world (especially since rates were in the 15-18% range just in the early 1980’s).
Mortgage rates are volatile. They will go up and down. The expectation at this point is that rates are going up. Expectations are an important player in future interest rates and right now the expectation is that interest rates are going up (& substantially) in the near future.
The fed is in a pinch right now. Usually the way to stimulate the economy is to lower interest rates, but the way to tame inflation is to raise interest rates.
Take what you can get, 6.5% is low by historical standards… You might get a slightly lower rate, but the expectation is that rates are going up and not down.
good luck!
Nobody can predict what rates are going to do and as a consumer, you should not speculate about it. If you are in the market to buy a home, you need to find the best terms that you can at that point and time and the advice is usually to lock the rate as soon as you can.
In January, rates dipped low and shot up 0.5% in 6 hours one day; no joke. With that kind of potential risk, why would you want to hold out for a rate that is 0.125% better? How much are you borrowing? That 0.125% cost $ 125/year on 100K. That is < $ 10.50 month in interest and < $ 9/month in payments. If you haven't already looked in to it, check with your state housing finance agency to see if they have any special pricing for first time home buyers. In Ohio, the current bond money rate is 6.25 with 1% origination. They offer FHA, VA, USDA and conventional programs as well as down payment assistance and affordable 2nd mortgages to use for down payment and/or closing costs. Your state may have a similar program. Forget about the fed funds rate. It has nothing to do with mortgage interest rates and the government doesn't set the rates; the market does and they are based on perceived risk and expecations about inflation (a driving force in recent increases). If you are serious about buying a home, you need to find a property and get it under contract and lock the rate a.s.a.p. before anything worse happens in the market. Rates are still low by historical standards. 8.25% might be a good average rate for any ten year period in the last 40 years with the exception of perhaps the last ten years. We have been spoiled and now everyone thinks that they need a rate in the 5's or else they are getting screwed somehow. If that is what you want, look in to the ARMS. If you prefer the security of a fixed rate, suck it up and find the best one you can. Take a look at the yield on the 10 year bond. That is the risk free rate for 10 years. If someone is willing to lend you more than you have ever borrowed on a 30 fixed rate program and the premium is only 2.5% above the risk free rate, the only questions you should be asking is where do I sign and how soon can we close? My first loan was an FHA loan at 10.5% back in 1990. I was just surprised that anyone would lend me 120K. Any honest person will tell that with rates the only thing they can tell you with any certanty is that they will change. If you find one that works, you should take it before it is gone. Good luck and sorry for rambling. I hope something I have said will help.