Mortgage Interest Rates Rise Dramatically Last Week
Posted by Benjamin Dona on Saturday, June 14th, 2008 at 1:09pm.
Rates on 30-year mortgages have jumped to their highest level in nearly eight months, reflecting the markets increased concerns about what the Federal Reserve might have to do to battle rising inflation. The MBAA reported that 30-year fixed-rate mortgages averaged 6.24% last week. That was up sharply from 6.17% the week before. It was the highest level for 30-year mortgages since they averaged 6.33% for the week ending October 26, 2007.
Analysts attributed the big jump to increased concerns in financial markets that the Federal Reserve might be preparing to start raising interest rates again in order to control inflation and bolster the weak dollar. 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." Comments like this have led many investors to move up the date when they believe the Fed might start raising interest rates. Many are now predicting the Fed to start raising rates sooner rather than later.
Other types of mortgages also showed sharp increases this week. Rates on 15-year fixed-rate mortgages rose to 5.78%, up from 5.70% and the 5-year adjustable-rate mortgage rose to 5.70%, up from 5.51%. With the housing market already facing numerous headwinds including slumping prices and rising mortgage defaults, higher interest rates will not help the situation at all. Our hope is the Fed will be able to find an equilibrium point between successfully fighting inflation and keeping interest rates affordable.
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