FHA Mortgage Rates (Nov 18)

FHA Mortgage Rate Recommendation: If I were closing on an FHA Home Loan anytime within the next 60 days I would float in my FHA Mortgage rate.

Tuesday’s bond market has opened in positive territory again, despite early stock gains.  The stock markets are rebounding from yesterday’s 223 point loss in the Dow with fairly strong gains during morning trading.  The Dow is currently up 181 points while the Nasdaq has gained 11 points.  The bond market is currently up 9/32, which will likely improve this morning’s FHA mortgage rates by approximately .125 of a discount point.

The Labor Department gave us the first of the week’s two key inflation readings.  They reported that the PPI fell a whopping 2.8% that was a much larger drop than analysts had forecasted.  However, the more important core data reading that excludes more volatile food and energy prices rose 0.4% when analysts were expecting to see a 0.1% rise.  This means that prices for non food and energy costs rose more than expected, which is considered bad news for bonds and FHA mortgage rates.

Today’s markets are being boosted by favorable comments by Treasury Secretary Paulson that the Fed bailout program was making progress.  Many lawmakers had questioned the usage of the money for the program but market participants liked what they heard, helping to fuel this morning’s buying in stocks and bonds.

Tomorrow’s only data is October’s Housing Starts. This data gives us an indication of housing sector strength, but usually does not have a noticeably impact on mortgage rates. I don’t expect this month’s version to be any different unless it varies greatly from analysts forecast. It is expected to show a decline in starts of new homes.

Tomorrow afternoon brings us the release of the minutes to the last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over inflation and the Fed’s next move. If the Fed members were concerned about inflationary pressures, we may see the bond market move lower and mortgage rates higher tomorrow afternoon. However, if they indicate a likelihood of another rate cut in the coming months, we should see the bond market rise and FHA mortgage rates drop during afternoon trading.