Mortgage Rates on the Rise

[Jun 3, 2007.]

Freddie Mac is reporting that mortgage rates are on an upward spiral once again. The rapid rise signals that the Federal Reserve Board believes that inflation continues to be a problem. It could also indicate tough times ahead for those in the market to buy a new house.

In the week ending May 16th, the average rate on a 30-year fixed rate loan was 6.21%. That's up from 6.15% the week before. However, the rate is still lower than last year’s rate of 6.60%.

Freddie Mac vice-president Frank Nothaft, an economist, offered this assessment of the situation: "Mortgage rates inched up this week following the Federal Open Market Committee statement reiterating that the predominant concern remains the risk that inflation will fail to moderate as expected. However, as long as core inflation continues to trend downward and economic growth remains sub-par it is unlikely that we will see any big movement in mortgage rates."

The rate on 15-year loans clocked in at 5.92%, a slight increase over the previous week's rate of 5.87%. Last year at this time, the rate was 6.20%. Five-year adjustable rate mortgages jumped to 5.92%, an increase from the 5.89% of the previous week. Last year, the five-year adjustable rate mortgage was 6.23%. The one-year adjustable rate mortgage averaged 5.48%, holding steady from the previous week. Last year at this time, the one-year adjustable rate mortgage was 5.62%.

Meanwhile, consumer prices jumped less than expected in April, although core prices of the Consumer Price Index increased at a faster pace.

Overall, the economic figures indicate that the financial outlook may be a bit brighter now than it was last year at this time. However, inflationary fears continue to threaten the overall health of the 2007 economy.

Julie Ann Amos
June 3rd 2007

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