On Wednesday, July 3, 2008, the Federal Reserve left the Fed Funds rate unchanged at 2.00%. Since September, the Fed has cut rates a total of 3.25%. The economy has slowed and inflation is becoming an important factor to the economy. To combat inflation, the Fed must ultimately raise interest rates. What does this mean for mortgage rates? Mortgage rates follow bond prices and what often appears to be negative news for the economy and the stock market can actually be positive for mortgage rates.
The 30 year fixed rate mortgage averaged 6.4% in Freddie Macs survey for the week ending July 3, 2008. This is the first time the 30 year fixed rate mortgage has fallen in 6 weeks. The week ending June 27, 2007 loan aplications actually increased by 4 percent.
FHA implemented it's risk-based pricing where the premium is based solely on the borrower's credit score and loan to value on June 14.