Posted on: Friday, January 30, 2004
Mortgage rates start inching upward after Fed statement
By Jeannine Aversa
Associated Press
WASHINGTON — Mortgage rates around the country rose this week amid speculation on Wall Street about when the Federal Reserve may begin to push up short-term interest rates.
The average rate on 30-year mortgages increased to 5.68 percent, up from 5.64 percent last week, Freddie Mac, the mortgage giant, said yesterday in its weekly nationwide survey of mortgage rates.
Rates on 30-year mortgages have bounced around after sinking to a four-decade low of 5.21 percent in the middle of June.
For 15-year mortgages, a popular option for refinancing, rates rose to 4.97 percent this week, up from 4.95 percent last week. Rates for one-year adjustable mortgages increased to 3.59 percent compared to 3.56 percent last week.
Fed Chairman Alan Greenspan and his colleagues Wednesday decided to hold a main short-term interest rate at a 45-year low of 1 percent, but they dropped a pledge to keep rates at near rock-bottom levels for a "considerable period." That prompted investors on Wall Street to speculate that rates would move up sooner than they previously thought.
"Mortgage rates were basically unchanged leading up to the (Fed's) announcement that opened the door to the possibility the Fed would raise rates sooner than expected," said Frank Nothaft, Freddie Mac's chief economist. "Following the policy statement, bond yields shot up, taking mortgage rates with them, raising the prospect that mortgage rates will be even higher next week," he said.
The nationwide averages for mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages each carried an average fee of 0.7 point this week, while one-year ARMs carried an average fee of 0.6 point.
A year ago, rates on 30-year mortgages averaged 5.90 percent, 15-year mortgages were 5.28 percent and one-year adjustable mortgages stood at 3.89 percent.
Home sales reached record high levels in 2003 powered by low mortgage rates that proved too good for buyers to pass up. Economists predict home sales will slow this year as mortgage rates creep up.
