Inflation & Mortgage Rate

Interest rates for long-term mortgages slipped lower this week due to some economic-data releases that indicated more subdued inflation in the near term. The shorter-term rates, such as those for adjustable-rate mortgages, remained almost unchanged due to market expectations of another rate hike by the Federal Reserve Board in their next meeting on January 31st.

According to the weekly report from Freddie Mac, the national average rate on the benchmark 30-year fixed mortgage fell to 6.15% from 6.21% a week earlier. This is the 5th straight dip in the rate, although it is still above its year-ago level of 5.74%. This rate is about the same as it was in late October of 2005.

The 15-year fixed-rate loan averaged 5.71%, down from last week's 5.76%. A year earlier, the 15-year loan averaged 5.19%.

The 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.76%, down from 5.78%. A year ago, the five-year ARM averaged 5.05%. The 1-year Treasury-indexed ARMs averaged 5.15%, nearly same as last week's 5.16%. ARMs have been more sensitive to hikes in short-term interest rates from the Federal Reserve over the past year. The rates of ARMs remain considerably higher than year-ago levels, when the average rate on 1-year ARM was 4.1% [Read our past posting on ARM].