| Mortgage rates edge
upward 4th straight week |
| By Holden
Lewis • Bankrate.com |
|
During a week in which many financial markets were
closed for four days in a row and lots of fat cats were skiing on
snow or sunning on sand instead of crunching numbers in the office,
mortgage rates didn't move much.
The benchmark 30-year fixed-rate mortgage rose 1 basis point, to 6.24 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 0.27 discount and origination points. One year ago, the mortgage
index was 6.27 percent; four weeks ago, it was 6.08 percent. The 15-year
fixed-rate mortgage rose 3 basis points to 5.99 percent. The 5/1 adjustable-rate
mortgage rose 4 basis points to 6.15 percent.
The average rate on the 30-year fixed has now risen four weeks
in a row. Just before that, it had fallen six weeks in a row. The
last time the 30-year rate was this high was Nov. 15, when it was
also 6.24 percent.
 |
Weekly national mortgage survey |
|
| This week's rate: | 6.24% | 5.99% | 6.15% |
| Change from last week: | +0.01 | +0.03 | +0.04 |
| Monthly payment: | $1,014.86 | $1,391.47 | $1,005.23 |
| Change from last week: | +$1.07 | +$2.67 | +$4.27 |
Not much economic news came out during the week, with
stock markets and the Federal Reserve being closed Monday for the New Year's holiday
and Tuesday as a day of mourning for President Ford. The two most important reports
of the week came out Wednesday. First, the Institute of Supply Management's index
for manufacturing in December was higher than expected at 51.4. In this gauge
of the nation's manufacturing activity, any number over 50 indicates expansion.
In November, the index had been 49.5, suggesting minor contraction. Inflation
still worries Fed
Later in the day, the Federal Reserve released the minutes of its
most recent rate policy meeting on Dec. 12. It showed that the members
of the rate-setting committee are still worried about inflation.
The key sentence of the minutes went like this: "Although readings on core
inflation had improved modestly since the spring, price pressures were not yet
viewed as convincingly on a downward trend. Most participants expected core inflation
to moderate slowly over time, but stressed that the risks to the inflation outlook
remained to the upside."
The point was reiterated a few paragraphs later, maybe to drive the point
home: "All meeting participants remained concerned about the outlook for
inflation. Although readings on core inflation had improved modestly since the
spring, nearly all participants viewed core inflation as uncomfortably high and
stressed the importance of further moderation."
These are not the
words of a central bank that is preparing investors for a forthcoming rate cut.
They're sending a signal that they probably will keep rates where they are for
the time being, but that if they do make a change, they're more likely to raise
short-term rates than to cut them. Gauging
housing slowdown's affect
Meanwhile, the Fed says in the meeting minutes,
"developments in the housing market continued to weigh heavily on economic
activity." If house prices fall a lot, "spillovers to consumption could
become more evident." Those would be reasons to cut short-term interest rates.
Some adjustable mortgage rates, and those for home equity lines of credit, would
also fall.
The Fed is saying that it will fight the inflation
that exists now, rather than prevent a housing-led recession that
might or might not materialize in the future, says Joel Naroff,
economist and principal of Naroff Economic Advisors. "How much
the industrial sector stalls is critical as the Fed is still focusing
on inflation," he writes in an analysis. "This report
doesn't tell us it is collapsing, which means that focus can be
maintained."
But,
Naroff adds, if the housing and auto sectors weaken even further, the Fed "may
be forced to start worrying about growth as well." That would bring rate
cuts. | 
