Mortgage rates stay flat
Mortgage rates have been remarkably
stable for more than a month, as Wall Street and the Federal Reserve
have concluded anew that inflation has been cast overboard and isn't
likely to pop to the surface soon.
The benchmark 30-year fixed-rate mortgage fell 1
basis point to 5.87 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 0.34 discount and origination points. One year ago, the mortgage
index was 5.97 percent.
The 15-year fixed-rate mortgage rose 1 basis point
to 5.19 percent. The one-year adjustable-rate mortgage fell 2 basis
points to 3.85 percent.
Rates on 30-year mortgages have remained in a narrow
range since early December, climbing as high as 5.92 percent on
average the week of Dec. 10 and falling as low as 5.81 percent the
following week. The steady rates reflect a belief that inflation
has been tamed, at least for now, and the Federal Reserve won't
raise interest rates for months and maybe not until 2005.
Several influential employees of the Fed spoke over
the first weekend of the year before the American Economic Association,
meeting in San Diego. The speech
that got the most attention was from Ben Bernanke, a member of the
Fed's board of governors and a member of the rate-setting Open Market
The consensus among private-sector economists is
that the economy will grow at a 4 percent rate this year, and Bernanke
says he generally agrees with that estimate. That rate of growth,
coupled with the economic stimulus from today's low rates, normally
would result in inflation -- which would drive up interest rates.
But Bernanke doesn't believe inflation is coming back anytime soon,
so low interest rates are justified.
The latest available inflation rate, 1.1 percent
for the 12 months ending in November, is "perhaps at the bottom
of the acceptable range," Bernanke says. And if inflation is
so low that he doesn't want it to fall further, he's not going to
rush out and raise interest rates.
Why is inflation so low? It comes down to the labor
market, in Bernanke's view. Workers are becoming ever more productive,
and the economy isn't creating jobs fast enough. "When one
looks at the full range of information available, the labor market
looks (if anything) weaker than a 6 percent unemployment rate suggests,"
He and other economists guess that a lot of
people have given up trying for work and thus aren't counted among
the unemployed. Whatever the explanation, there is plenty of room
for improvement in the employment situation: According to the Bureau
of Labor Statistics, 62.5 percent of the working-age U.S. population
has a job now, compared to peaks of 64.9 percent in 1999 and 2000.
And the population has increased more than 10 million since then.