2 Weeks of Rate Decreases, FHA Mortgage Insurance Assistance…What’s The Catch?

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It’s been awhile since we report good news and kept on feeling good about it for any extended period of time but lo, that’s what seems to be going on this week. For the second consecutive week, mortgage rates have dropped on the whole. “Consecutive” is the key word, because it marks the first time since September that we’ve seen that happen.

Now, don’t get too excited: Things are far from as great as we saw across the majority of 2016. Rates are nowhere near as good as they were during September. They are, however, the best we’ve seen across the board since November. This can basically be described in three steps:

  1. A Period of Unprecedented Good Rates
  2. A Shock in The Market
  3. Rates Calm Down

Part One consisted of almost the entirety of 2016, and we’ve talked about it plenty. There is literally no other point in history where mortgage rates have sat and stayed as low as they were for as long as they were. Part Two consisted of the relatively surprising presidential election results, which in turn drove rates much higher on the fly. The thing is, those rates only spiked relatively…to an otherwise normal point. Now the market is relaxing a touch, and rates seem to be going back down…but don’t get comfortable.

The truth is that we’re only now getting to the meat of the mess. As the president-elect enters office and administrative hearings continue, things will get rough before they get calm. This isn’t a comment on policy—it’s a comment on trends. When the market doesn’t know what’s coming, it behaves accordingly.

So here’s some actual good news, that you can definitely count on for the short term: The FHA has decreased the cost of mortgage insurance premiums. What this will do, theoretically, is make up for the increased cost of interest payments that come with the higher rates. You can learn more about this announcement here.

This is probably the time to lock in, or to push your clients toward an FHA mortgage if they prefer a low down payment. Uncertainty will probably push rates higher before they go lower, and writing down the mortgage insurance can only stretch so far.