Interest Rates On Their Way Up?
June 12, 2008
Are you considering buying a home? Read this Article - Printed in Last weeks USA TODAY
Rates on 30-year mortgages jumped to the highest level in nearly eight months, reflecting increased concerns about what the Federal Reserve might do to fight inflation.
Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 6.32% this week, a sharp increase from 6.09% last week. It was the highest level for 30-year mortgages since they averaged 6.33% for the week of Oct. 25.
Analysts attributed the big jump to increased concerns in financial markets that the Federal Reserve might be preparing to start raising interest rates in order to make sure that inflation does not get out of control.
[If rates go up and prices go down - you will most likely pay more per month for the same house]
"Mortgage rates jumped this week after a number of Federal Reserve officials ... expressed concern over a threat of inflation," said Frank Nothaft, Freddie Mac's chief economist.
In a speech on Monday, Federal Reserve Chairman Ben Bernanke signaled deepening worries about inflation and said that the Fed would "strongly resist" any tendency for Americans' expectations about price increases to become unsettled.
Those comments have led many investors to move up the date when they believe the Fed might start raising interest rates to some time later this year. From last September through April, the central bank was aggressively cutting rates to try to keep the economy from falling into a recession.
The housing market is facing numerous headwinds at present from slumping prices, which are keeping potential buyers on the fence, to rising mortgage defaults, which are dumping more homes on an already glutted market.
A year ago, rates on 30-year mortgages stood at 6.33%, 15-year mortgage rates averaged 5.99%, five-year adjustable-rate mortgages were at 6.37% and one-year adjustable-rate mortgages were at 5.75%.
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