FHA Interest Rates Up .5%
The economy has been showing signs of recovery all year and the FHA interest rate took a beating over the past 40 days. After seeing all-time lows near Thanksgiving, rates have gradually slid higher to close 2009 around 5.25% with no points.
2010 FHA Interest Rate Predictions are interesting at this point. The estimates would be for rates to hit anywhere between 5.25% and 6%+ in the next few months. My forecasting tools show 5.875% for December 2010. I use forecast.org and it’s been accurate in the past.
If homes show any appreciation next year, that will force housing payments higher. However, a 5/8ths increase to rates is more staggering. Home values have probably stabilized in most markets, but let’s say that home prices dropped 3% during 2010, you could buy at a less expensive price in December 2010 for the sake of this example. If mortgage rates have the 5/8th increase and home prices drop 3%, the monthly mortgage payment for a home purchased in December 2010 will be higher than in January 2010. The difference is a whopping 4% increase to monthly payment even though we’re assuming home values drop.
Mortgage rates make a bigger impact on monthly payment than the underlying home price. The real impact isn’t even limited to year one. The cost of a higher mortgage rate over time is a big cost. A $200,000 loan at 5.25% would pay over $12,000 less interest in the first 10 years versus a 5.875% loan. That’s a very big difference in cumulative interest based on interest rates alone.
See the latest in FHA Interest Rates and FHA vs Conventional comparisons.
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