FHA mortgage rates obey the marketplace just like conventional 30-year mortgage rates do. Due to their backing by the federal government, FHA mortgage loans enjoy a slight advantage over conventional loans. Mortgage rates FHA tend to be lower than the rate on the conventional 30-year loan. Specifically, as of September 12, 2011, the rate on a conventional 30-year fixed rate loan stood at 4.07 percent. The interest rate on an FHA 30-year fixed rate loan stood at 3.78 percent, a difference of more than 29 basis points or .29 percent.

This may not seem like much, but with the Federal Reserve holding the Federal Funds Rate at effectively zero percent, a difference of 29 basis points is quite large. Borrowers who have an FHA loan can save a bundle each month, depending on the total amount of the mortgage balance. The interest rate environment in the United States is extremely disjointed. Rates in the mortgage market are influenced by investor interest in mortgage-backed securities (MBS) and the yields on government debt securities.

MBS are made by aggregating mortgage loans sold off by banks and selling the resulting securities to investors. Investor demand for these fixed-income securities help determine mortgage rates. Buying or selling MBS in the open market creates a chain reaction that sends interest rates falling or rising for borrowers. MBS, in turn, are influenced by government debt yields, specifically the yield on the benchmark 10-year Treasury note. The average length of a 30-year fixed-rate loan is actually seven years. This is close enough to the 10-year that it is used as an indicator for the 30-year loan, both conventional and FHA.

Both MBS and Treasury yields have been hitting record lows. The increased demand for income is forcing investors and savers to look for yields in securities whose yields are really not worth talking about. The 10-year Treasury note has recently fallen below two percent and has traded below that historic level for two days in a row. Low yields on government bonds influence yields on MBS and thus on mortgage rates FHA. Negative pressure from the Federal Reserve, the government bond and the MBS markets will combine to create low rates for some time.

Borrowers can look forward to low rates for the foreseeable future. Specifically, low rates will persist until 2013, according to the Fed meeting on August 9. FHA mortgage rates will hit new lows, if recent activity is any guide.