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 Nov. 9, 2005.

Mortgages
Rate: 6.42 percent (30-year fixed) Average Points: 0.32
Mortgage rates continued to climb this week, with fixed-rate mortgages reaching the highest level since September 2003. The average 30-year, fixed-rate mortgage increased from 6.37 percent to 6.42 percent. The average 15-year, fixed mortgage rate increased as well, rising from 5.91 percent to 5.96 percent, while the average jumbo 30-year, fixed rate climbed to 6.6 percent from 6.54 percent last week. Adjustable-rate mortgages followed suit, with the average 5/1 adjustable-rate mortgage notching higher from 5.9 percent to 5.94 percent, while the average one-year ARM bounced higher from 5.35 percent to 5.44 percent. The average one-year ARM rate is the highest since April 2002. Mortgage rates were driven higher by continued inflation fears, the latest of which came courtesy of a larger-than-expected increase in average hourly wages, as detailed in the October employment report. Inflation threatens to erode the fixed payments that bondholders receive, so investors push yields on government bonds and similar instruments like mortgage bonds higher in response.

Home equity products
Rates: 7.04 percent (line of credit); 7.33 percent (loan)
With interest rates rising, consumers are seeing higher borrowing costs at every turn. This is evident on home equity products where rates are rising on both home equity loans and lines of credit. The average rate for a home equity line of credit jumped above the 7-percent mark for the first time since July 2001, going from 6.97 percent to 7.04 percent. Home equity loans, which carry fixed interest rates, increased strongly for the second consecutive week. The average home equity loan rate climbed from 7.28 percent to 7.33 percent. While existing home equity loan borrowers are not impacted by rising rates, borrowers on the sidelines waiting to lock in or refinance out of a variable rate line of credit are impacted by the higher rates on home equity loans.

Certificates of deposit
Yields: 3.15 percent (one-year CD yield); 3.78 percent (five-year CD yield)
The combination of an active Federal Reserve and a recent rise in long-term interest rates means that yields on certificates of deposit will post slow, steady improvement week after week. This week did not disappoint, with CD yields higher across all maturities. The average two-year CD yield showed the most improvement, rising from 3.39 percent to 3.42 percent. The one-year and five-year maturities inched higher, to 3.15 percent and 3.78 percent, respectively. Investors should not be pursuing average CD yields however, as higher returns exist for those willing to deposit money with out-of-state banks. For example, the highest-yielding one-year CD that is available nationwide is 4.75 percent, and the highest-yielding five-year CD available nationwide is 5.11 percent.