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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 Jan. 4, 2006.
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Mortgages
Rate:
6.27 percent (30-year fixed) Average Points: 0.27 
Mortgage rates fell slightly this week, the fourth consecutive
weekly decline. The average 30-year fixed-rate mortgage inched
lower from 6.28 percent to 6.27 percent, while the average
jumbo 30-year fixed rate was unchanged at 6.45 percent. The
average 15-year fixed mortgage rate was also down, falling
from 5.86 percent to 5.82 percent. Adjustable-rate mortgages
dipped as well, with the average 5/1 adjustable-rate mortgage
dropping from 5.82 percent to 5.78 percent, while the average
one-year ARM nosed down to 5.55 percent from 5.56 percent.
Mortgage rates of both flavors -- fixed rate and adjustable
rate -- declined this week in response to release of the Federal
Reserve's Dec. 13 meeting minutes. Hopes were buoyed that
the Fed is nearing an end of the interest rate hikes, with
yields on Treasury securities from two years through 10 years
in maturity declining and bringing many fixed and adjustable
rates down, too. Mortgage rates are closely related to yields
on government bonds.
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Home
equity products
Rates: 7.32 percent (line of credit);
7.44 percent (loan)
Rates for home equity lines of credit zoomed higher, rising
from 7.25 percent to 7.32 percent. By contrast, fixed-rate
home equity loans increased by just 1 basis point to 7.44
percent. A basis point is one hundredth of 1 percentage point.
The sensitivity of HELOCs to rising short-term interest rates
and the movement of fixed-rate home equity loans in relation
to long-term interest rates highlights one of the attractive
moves for borrowers in the new year. The gap between rates
on HELOCs and home equity loans is narrowing quickly and will
narrow even further as the Fed raises short-term interest
rates. Borrowers can refinance out of a HELOC, avoiding the
continued interest rate escalation, and into a fixed-rate
home equity loan. This not only locks in a fixed rate now,
but also puts the loan balance on a specific term with a defined
repayment date. Each payment will include some principal repayment,
allowing the borrower to gradually restore his home equity
as the loan balance declines.
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Auto
loans
Rates: 7.9 percent (48-month,
new-car); 8.45 percent (36-month, used-car)
Auto loan rates remain stuck in neutral. No rate changes were
seen on any of the new-car loan terms surveyed. The average
rates for three-year, four-year and five-year new-car loans
held at 7.85 percent, 7.9 percent and 7.93 percent, respectively.
The average three-year, used-car loan rate was unchanged at
8.45 percent. Auto loan rates have shown little movement in
the past month after falling sharply at the end of November.
Even that move was not the result of widespread rate changes
but rather a repricing by banking stalwart Bank of America.
The tepid movement in auto loan rates is likely to persist
despite another Fed rate hike expected at the end of the month.
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Certificates
of deposit
Yields:
3.28 percent (one-year CD yield); 3.92 percent (five-year
CD yield)
If you were expecting big improvement in CD yields this week,
you will come away disappointed. Yields on all maturities
from six months through five years were unchanged. Only the
three-month CD yield showed any movement, and surprisingly
it declined. The average three-month CD yield ticked lower
from 2.45 percent to 2.44 percent. Despite the optimism that
the Fed is nearing the end of interest rate hikes, the odds
are that a couple more rate hikes are still in the pipeline.
This is good news to investors in short-term CDs, as this
week will prove to be an anomaly and yields will continue
to move higher. Yields on longer maturities are slated to
start 2006 much the way they ended 2005 -- with little notable
improvement. This too could change, particularly once the
Fed indicates it is done raising interest rates.
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Credit
cards
Rates: 12.94 percent (standard fixed);
13.55 percent (standard variable)
The averages for fixed rates dropped unexpectedly, and those
for variable rates moved sharply higher this week. What gives?
The volatility was not due to issuer repricing but rather the
annual update Bankrate makes to its survey of the 50 largest
issuers. Each year, several issuers drop out of the top 50 issuers
and are replaced by others. This was that week. The average
standard fixed rate fell from 13.03 percent to 12.94 percent,
and the average for all classes of fixed rate cards -- standard,
gold and platinum -- retreated from 11.57 percent to 11.45 percent.
The average standard variable rate ticked up from 13.52 percent
to 13.55 percent, while the average variable rate for all classes
reset from 12.6 percent to 12.82 percent. Just because we didn't
see any issuers change rates this week doesn't mean cardholders
are out of the woods. Issuers are still playing catch-up to
previous Fed rate hikes, and with another expected at month-end,
cardholders can expect to see additional increases in variable
rates. Even fixed-rate cards could be subject to a repricing
or being replaced by a variable rate offering. |
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