Mortgage: Rates Up

Testifying before the House Committee on Financial Services yesterday, the new Fed Chairman, Ben Bernanke said that short-term interest rates are "still relatively low" and "some further firming of monetary policy may be necessary." This leaves little doubt in our mind that Fed's Open Market Committee would raise rates by quarter point to 4.75% in their next meeting on March 27-28.

This influenced the increase in mortgage rates this week. According to Freddie Mac's weekly report, the 30-year fixed-rate mortgage increased this week to the highest level of this year -- a national average of 6.28%. A year ago, this rate averaged at 5.62%. The average rate on a 15-year fixed-rate mortgage rose to 5.91% from 5.83% a week ago. Last year at this time, the loan averaged 5.14%.

The 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) averaged 5.95% this week, up from 5.89%. One year ago, this rate averaged at 5.05%. One-year, Treasury-indexed ARMs averaged 5.36%, up slightly from 5.34% last week. A year ago the ARM, which is usually more sensitive to Federal Reserve rate hikes, was at 4.15%. With increasing rate, ARM is really losing its popularity it enjoyed in 2001-2003 [Read our past posting on ARM].