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| 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 Dec. 28, 2005.
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Mortgages
Rate:
6.28 percent (30-year fixed) Average Points: 0.36
Fixed mortgage rates fell slightly this week, as long-term interest rates declined following a large decrease in new home sales. The average 30-year fixed rate mortgage dipped from 6.33 percent to 6.28 percent, with the average 15-year fixed mortgage rate declining by the same amount, from 5.91 percent to 5.86 percent. The average jumbo 30-year fixed rate followed suit, falling from 6.5 percent to 6.45 percent. Adjustable rate mortgages were mixed, with the average 5/1 adjustable rate mortgage dropping from 5.9 percent to 5.82 percent, while the average one-year ARM increased from 5.53 percent to 5.56 percent. The decline in fixed mortgage rates and the increase in one-year adjustable rates mimicks a similar move in Treasury yields. Yields on short- and long-term Treasury securities crossed paths this week, with yields on ten-year Treasury notes actually lower than yields on shorter term government securities maturing in six months, one year, and two years. Known as an inversion of the yield curve, it highlights the current attractiveness of fixed rate mortgages relative to adjustable rate mortgages that subject borrowers to increases in monthly payments.
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Home
equity products
Rates: 7.25 percent (line of credit);
7.43 percent (loan)
What does an inverted yield curve mean to home equity borrowers?
Look at this week as an illustration. The average home equity
line of credit rate increased from 7.24 percent to 7.25 percent,
while the average home equity loan rate was steady at 7.43
percent. The steady increase in short-term interest rates
that has produced a flattening, then inverted, yield curve
has also pushed HELOC rates steadily higher. Since the beginning
of 2005, the average HELOC rate has rocketed from 5.62 percent
to 7.25 percent. Meanwhile, the average home equity loan rate
has increased at a more tepid pace this year, from 6.94 percent
to 7.43 percent. Fixed rate home equity loans are pegged to
yields on longer-maturity Treasuries that have increased in
a more modest fashion in 2005. Home equity borrowers should
prepare for higher HELOC rates as the Fed continues raising
short-term interest rates, making fixed rate home equity loans
an attractive alternative before those rates rise further
also.
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Auto
loans
Rates: 7.9 percent (48-month,
new-car); 8.45 percent (36-month, used-car)
Auto loan rates inched higher this week. The average three-year and four-year new car loan rates each increased one basis point to 7.85 percent and 7.9 percent, respectively. A basis point is one-hundredth of one percentage point. The average five-year new car loan rate remained at 7.93 percent for the third consecutive week. The average three-year used car loan rate also inched one basis point higher, rising to 8.45 percent. New car loan rates have each increased approximately 35 basis points during 2005. The average four-year new-car loan rate increased from 7.54 percent to 7.9 percent since the beginning of the year, with the three-year and five-year loans moving similarly. On a four-year, $22,000 loan, this is a difference of less than $4 per month. The average used car loan rate showed the least movement since the beginning of 2005, from 8.4 percent to 8.45 percent.
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Certificates
of deposit
Yields:
3.28 percent (one-year CD yield); 3.92 percent (five-year
CD yield)
Yields increased on most maturities of certificates of deposit. An exception was the five-year maturity that held at 3.92 percent for the third consecutive week. This is not unexpected, as the five-year maturity has shown scant improvement in relation to other maturities in 2005. Blame it on the flattening, and now inverted, yield curve as the average 5-year CD yield was held in check during much of the year. The average five-year CD yield began 2005 at 3.55 percent. Consistent improvement was the order of the week on other shorter maturities. In a nutshell, this is how much of the year went on CDs, with notable improvement occurring over the preceding 52 weeks. The average one-year CD yield, inching higher from 3.27 percent to 3.28 percent this week, is up from 2.08 percent at the beginning of January. The average six-month CD yield increased from 2.82 percent to 2.84 percent this week, and jumped from 1.74 percent the first week of 2005.
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Credit
cards
Rates: 13.03 percent (standard fixed);
13.52 percent (standard variable)
Variable credit card rates are plodding higher while fixed rates
remain rooted. The escalation in variable credit card rates
can be expected to continue as long as the Federal Reserve is
raising short-term interest rates, and then some. Issuers are
still playing catch-up to the November and December Fed rate
hikes, with the average standard variable rate notching higher
this week to 13.52 percent. Across the standard, gold, and platinum
classes, the average rate for all variable cards increased from
12.59 percent to 12.6 percent. Because issuers lag the Fed in
raising rates, cardholders can expect to see one or two additional
increases even once the Fed is done raising interest rates.
The average standard fixed rate card is still 13.03 percent
and the average for all fixed rate cards remains 11.57 percent.
However, do not be lulled into complacency with fixed rate cards
as issuers can change the rate or switch the card to a variable
rate with as little as 15 days' notice. |
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