Slow Growth, Fed, Mortgage
Today the Commerce Department reported that the growth in the U.S. economy slowed dramatically to a 1.1% annual rate in the 4th quarter, the weakest growth in three years. The slowdown in real gross domestic product from 4.1% in the 3rd quarter to a mere 1.1% in the 4th was largely due to weak auto sales, slower business investment, a rise in imports and a large drop in federal spending.
The report may put the Federal Open Market Committee in a dilemma. If growth were to remain tepid, the Fed would be obligated to hold rates steady or even cut them in their next meeting on January 31st. But the continued inflation pressures, in particular from oil price, may argue for higher rates.
In expectation of another quarter point hike in short term interest rate by the Federal Reserve in their next meeting, the average mortgage rate has moved up a bit this week after 6 weeks of continuous decline.
According to Freddie Mac's weekly report, the national average rate on the benchmark 30-year mortgage was 6.12%, up from 6.1% a week earlier. The 15-year mortgage, a popular refinancing choice, also ticked up, to 5.7% from 5.67%. The long-term rates are still below December's monthly average and are still continuing to fuel the housing market. Both loans remain above their year-ago levels, however, when the 30-year averaged 5.67% and the 15-year stood at 5.15.%
The 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.75%, unchanged from last week. The 1-year Treasury-indexed ARMs averaged 5.2%, up from 5.18% of last week.
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