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Weirdness on rates

By Holden Lewis ·
Thursday, October 14, 2010
Posted: 9 am ET

The average rate on the 30-year, fixed-rate mortgage went up this week in Bankrate's survey. Rates on other types of mortgages went down. Both ways, the movement was small. Overall, you could say that mortgage rates, on average, were about the same.

On the 30-year fixed, the biggest banks tended to raise rates this week, while smaller lenders tended to keep rates the same or cut them. But that doesn't necessarily mean the little lenders offered better deals.

Take the New York City market, for example. Bank of America raised the rate on the 30-year fixed by a quarter of a percentage point, to 4.25 percent, charging 1.38 discount points. Astoria Federal kept the rate unchanged, also at 4.25 percent, but at zero discount points. Sovereign Bank cut by an eighth of a percentage point, to 4.625 percent, charging 0.25 discount points.

I was surprised that rates didn't fall. Yields on mortgage bonds dipped in the last week. Mortgage rates didn't fall with them. Maybe banks are working on so many mortgage applications that they don't want to cut rates more, for fear of being overwhelmed with business. That's my theory, probably naïve.

In this week's Rate Trend Index, the majority of voters say they don't expect mortgage rates to change much over the next week. I embrace the consensus view that rates will remain relatively unchanged, but if they do move, they're more likely to fall than to rise.

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Holden Lewis
October 14, 2010 at 12:10 pm

What's naive about that? You're probably right!

C. Burke
October 14, 2010 at 12:09 pm

Maybe the mortgage companies, already having low rates, are trying to make some extra profit on the mortgages by keeping the rates up for a bit longer to pocket the spread between the bonds and the mortgage rate. But that may be me being naive, too.