Mortgage rates finally stop rising

Mortgage rates finally stopped rising. Rates had gone up nine weeks in a row. This week, for the first time since early September, mortgage rates didn't rise.

The end of the longest rising-rate streak in 18 years is being celebrated in silence. The streets remain peaceful as home buyers observe the end of the remarkable run by wondering whether they should lock, in case rates resume their upward path again, or float, in case rates fall. There is no celebratory speech by the chairman of the Federal Reserve, nor are fireworks being discharged over the headquarters of the Mortgage Bankers Association. Calm reigns over this electrifying development in mortgage rates.

The benchmark 30-year, fixed-rate mortgage remained 6.42 percent, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.35 discount and origination points. One year ago, the mortgage index was 5.76 percent. Four weeks ago, it was 6.17 percent.

The 15-year, fixed-rate mortgage rose 3 basis points, to 5.99 percent. A basis point is one-hundredth of 1 percentage point. The 5/1 adjustable-rate mortgage fell 1 basis point, to 5.93 percent.

In Bankrate's weekly survey, the 30-year benchmark rate hasn't dropped since Aug. 31, when it fell 6 basis points to 5.8 percent. It remained 5.8 percent the next week. Then it rose every week from Sept. 14 to Nov. 9, from 5.84 percent to 6.42 percent.

The last time rates rose nine weeks in a row was August to October 1987. In what must have been a soul-crushing nine-week period for house-hunters, rates shot up from 10.46 percent to 11.77 percent. The streak ended the week of Black Monday, the 1987 stock market crash, so it wasn't much comfort.

We avoided such carnage this time. The benchmark rate rose 62 basis points during this nine-week streak, and a stock market crash didn't end it.

News about inflation kept rates flat this week. On Tuesday the federal government released the October Producer Price Index, a measure of wholesale prices. On Wednesday the feds came out with the October Consumer Price Index, which measures retail prices. Bond traders concluded from the reports that inflation remains under control, and mortgage rates stayed the same as a result.

The CPI showed that overall retail prices rose 0.2 percent in October. The core CPI, which is what you get when you strip out frequently fluctuating food and fuel costs, also went up 0.2 percent. Over the last year, consumer prices overall are up 4.3 percent, and core prices are up 2.1 percent. Core inflation is slightly higher than the Federal Reserve wants it to be, and the central bank is tackling it by continuing to hike short-term interest rates. The steep rise in overall prices is driven by sharp increases in the costs of gasoline and natural gas, and the Fed can't do anything about that.

The report on wholesale prices tells a confusing story. Overall wholesale prices rose a hefty 0.7 percent in October; much more than economists had expected. But core wholesale prices, excluding food and energy, dropped 0.3 percent. That surprising core number comforted bond traders, giving them reason to believe that inflation will remain in check.

"So inflation remains tame," says Bob Walters, chief economist for Quicken Loans. "The Fed is basically doing what they need to do."

Wednesday's release of the core CPI number reinforced that perception. The benign inflation outlook halted the rise in long-term rates, at least temporarily.

Skyrocketing prices aren't confined to auto fuel and natural gas. House prices are about to reach orbit. According to the National Association of Realtors, prices for used houses rose 14.7 percent nationwide from the third quarter of 2004 to the third quarter of this year (July through September). Home prices in the Phoenix area rose 55.2 percent in that period.