Interest Rate Roundup

Here's a look at the state of interest rates on five common consumer banking products and the latest rates from Bankrate.com's weekly national survey of large banks and thrifts conducted Sept. 14, 2005.

Mortgages
Rate: 5.84 percent (30-year fixed) Average Points: 0.37
Mortgage rates were little changed as the economic impact of Hurricane Katrina remains unknown. The average 30-year fixed-rate mortgage increased from 5.8 percent to 5.84 percent, and the average 15-year fixed mortgage rate increased by a similar amount, rising from 5.39 percent to 5.44 percent. The average jumbo 30-year fixed rate climbed above the 6 percent barrier to 6.02 percent from 5.97 percent last week. Adjustable-rate mortgages were mixed, with the average 5/1 adjustable-rate mortgage rising from 5.36 percent to 5.4 percent, while the average one-year ARM fell from 4.91 percent to 4.87 percent, the lowest point since Aug. 3. Mortgage rates are largely unchanged since Hurricane Katrina ravaged the Gulf Coast. With the economic impact and the path of the Federal Open Market Committee, which meets again Sept. 20, still being debated, yields on 10-year Treasury notes remain near 4.15 percent. Fixed mortgage rates are closely related to yields on long-term government bonds. Some clarity as to the Fed's intentions may emerge following the Sept. 20 meeting, but the economic impact of the storm is far from being determined.

Home equity products
Rates: 6.75 percent (line of credit); 7.16 percent (loan)
Home equity lines of credit have been on the rise ever since the Federal Reserve began boosting interest rates in June 2004. Last week was an exception to that, but this week was not. The average HELOC rate reversed last week's move, returning to 6.75 percent from 6.74 percent. The average rate has registered 6.75 percent in three of the past four weeks. So is this a ceiling for HELOC rates? We'll know more after the Sept. 20 Fed meeting, but probably not. The Fed is likely to raise rates again, if not on Sept. 20 then at least once by year-end. This will be the impetus for a renewed push toward higher HELOC rates. The average rate for a fixed-rate home equity loan fell from 7.2 percent to 7.16 percent, the lowest since July 27. This further closes the gap between rates on HELOCs and home equity loans, and the fixed-rate home equity loan will remain an attractive option if the Fed continues to raise short-term interest rates.

Certificates of deposit
Yields: 2.98 percent (one-year CD yield); 3.78 percent (five-year CD yield)
Certificate of deposit yields slumped this week across nearly all maturities. The average one-year CD yield dipped from 2.99 percent to 2.98 percent, and the average five-year CD yield did the same, falling from 3.79 percent to 3.78 percent. The same was true on all maturities except the three-month CD, where the average yield increased from 2.14 percent to 2.16 percent. The results were different on jumbo CDs, those requiring minimum deposits of approximately $100,000. Yields on jumbo maturities shorter than one year were unchanged, while the average yield on maturities of 12 months through 30 months dropped. The average jumbo five-year CD yield increased from 3.89 percent to 3.9 percent. CD investors should pay close attention to the Sept. 20 Fed meeting. If the Fed raises interest rates and signals an intent to continue doing so at future meetings, yields on maturities of one year and less will benefit. If the Fed indicates a bias toward refraining from interest rate hikes until the economic impact of Hurricane Katrina is better known, yields on those same maturities may slump.