Mortgage Rates Move Higher Following Fed Cut

Fixed mortgage rates increased for the second consecutive week, with the average conforming 30-year fixed mortgage rate rising to 6.49 percent. According to Bankrate.com’s weekly national survey of large lenders, the average 30-year fixed mortgage has an average of 0.37 discount and origination points.

The average 15-year fixed rate mortgage popular for refinancing increased by a similar amount to 6.16 percent. The average jumbo 30-year fixed rate nosed higher to 7.31 percent. Adjustable mortgage rates were mostly lower, with the average one-year ARM slipping to 6.21 percent, and the average 5/1 ARM sliding to 6.35 percent.

A popular misconception is that fixed mortgage rates take their cue from the actions of the Federal Open Market Committee. The past week is evidence that it rarely works that way. After the Fed cut short-term interest rates by a larger-than-expected half percentage point on Sept. 18, concerns about inflation began to percolate. Since inflation is the worst enemy of long-term bond investors, yields on ten-year government bonds moved higher. Fixed mortgage rates are closely related to yields on ten-year Treasury notes, explaining the increase over the past week. The inflation focus of today could quickly give way to economic worries, however, should disappointing data emerge. In all likelihood, this would pull mortgage rates lower. The Fed remains coy about plans for the next meeting October 30-31.

Fixed mortgage rates remain the most attractive option for borrowers. Just two months ago, the average 30-year fixed mortgage rate was 6.75 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,297.20. Now that the average conforming 30-year fixed rate is 6.49 percent, the same $200,000 loan carries a monthly payment of $1,262.82.

30-year fixed: 6.49% — up from 6.32% last week (avg. points: 0.37)
15-year fixed: 6.16% — up from 6.00% last week (avg. points: 0.36)
5/1 ARM: 6.35% — down from 6.41% last week (avg. points: 0.37)

Bankrate’s national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week’s move in mortgage rates, go to http://www.bankrate.com/mortgagerates.

The survey is complemented by Bankrate’s weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next 30 to 45 days. This week, 60 percent of the panelists predict rates will continue to rise. Just 18 percent forecast a decline, while 22 percent expect rates will remain relatively unchanged in the next 30 to 45 days.

For the full mortgage Rate Trend Index, go to http://www.bankrate.com/RTI.

About Bankrate, Inc.

Bankrate, Inc. (”Bankrate”) owns and operates Bankrate.com, a leading Internet consumer banking marketplace. Bankrate.com is a destination site of personal finance channels, including banking, investing, taxes, debt management and college finance. Bankrate is the leading aggregator of more than 300 financial products, including mortgages, credit cards, new and used auto loans, money market accounts and CDs, checking and ATM fees, home equity loans and online banking fees. Bankrate reviews more than 4,800 financial institutions in 575 markets in 50 states. In 2006, Bankrate.com had nearly 53 million unique visitors. Bankrate provides financial applications and information to a network of more than 75 partners, including Yahoo! , America Online , The Wall Street Journal and The New York Times . Bankrate’s information is also distributed through more than 400 national and state publications. In addition to Bankrate.com, Bankrate also owns and operates FastFind, an internet lead aggregator and Mortgage Market Information Services, Inc. and Interest.com, Inc., each of which publishes mortgage guides and financial rates and information.