Mortgage rates barely move
By Holden Lewis and Daniel P. Ray • Bankrate.com

This is a slow time of the year, on Wall Street and in mortgage offices, and mortgage rates were no exception. They moved sluggishly, too, still digesting a piece of news from last week.

The benchmark 30-year fixed-rate mortgage rose 5 basis points to 5.86 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.38 discount and origination points. One year ago, the mortgage index was 6.02 percent.

The 15-year fixed-rate mortgage inched up 3 basis points to 5.17 percent. The one-year adjustable-rate mortgage behaved contrarily, falling 9 basis points to 3.87 percent.

Experts attributed much of the slight rise in mortgage rates to economic news from more than a week ago showing inflation to be in dormancy.

Coupled with rip-roaring productivity numbers, it convinced many investors that stocks were again the place to invest: The stock market roared to 19-month highs.

Bond yields and mortgage rates often rise when the economy grows quickly, as investors fear a similar increase in inflation. Mortgage rates are closely tied to the yields on long-term government bonds. But the low inflation outlook continues to keep a lid on interest rates even as the economy expands.

Even evidence of an improving job market has done little to affect rates. Last week's report of initial jobless claims delivered some hopeful news -- 353,000 people had filed unemployment claims, a big decline from the previous week, and the four-week average of jobless claims fell to 361,750. A number below 400,000 is generally thought to reflect a job situation that's not getting worse and possibly getting better.

As the job situation improves, new people enter the labor force -- children who reach working age, newly divorced homemakers, recent graduates from school, and so on. The labor force grew by 484,000 people last month. During the same month, the economy added 589,000 jobs, barely keeping pace with the growth in the labor force. That's why the unemployment rate barely budges, and the weak job market partly explains why inflation has been just a little more than 1 percent this year.