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The Honolulu Advertiser
Posted on: Friday, October 18, 2002

Mortgage rates rise after rally in stocks

Associated Press

WASHINGTON — Mortgage rates around the country edged up this week, with rates on 30-year mortgages climbing to their highest level since the middle of September.

Mortgage giant Freddie Mac, in its weekly nationwide survey of mortgage rates, reported yesterday that the average interest rate on 30-year fixed-rate mortgages rose to 6.15 percent this week from last week's 5.98 percent, which marked the lowest level since Freddie Mac began tracking these rates in 1971.

This week's rate was the highest since the week ending Sept. 13, when rates on 30-year mortgages averaged 6.18 percent.

Mortgage rates rose as a recent stock market rally slowed investor demand for bonds, helping to push long-term rates up.

"Several large corporations released strong earnings and sales forecasts recently, igniting a rally in the stock market this week," explained Frank Nothaft, Freddie Mac's chief economist. "As a result, investors pulled money out of the bond market and put it into stocks, causing bond yields and other interest rate to rise. Mortgage rates followed suit, to a lesser degree."

Still, economists predict that mortgage rates probably will hover around current levels and won't jump dramatically, something that bodes well for the housing market, one of the economy's few bright spots.

Low mortgage rates have been feeding a refinancing boom. Extra cash or savings from refinancing deals is helping to support consumer spending, including home buying, even as consumer confidence erodes and the job market remains sluggish. Rate sales are expected to post records this year.

Rates for 15-year fixed-rate mortgages, a popular option or refinancing, moved up to 5.56 percent this week, from last week's 5.34 percent, the lowest level since Freddie Mac began tracking these rates in 1991.

For one-year adjustable-rate mortgages, rates rose to 4.27 percent, up from 4.23 percent last week.