Mortgage Rates Soar to Two-Year High
Mortgage interest rates spiked in mid-June to their highest levels in two
years, said mortgage firm Freddie Mac, raising the costs of home mortgage
loans and home equity loans for consumers. High rates are making it difficult
for home buyers to decide whether to "float" with the market to see if rates
go down, or lock-in their loan at current interest rates.
For the week ending June 18, 1999 the average rate on U.S. 30-year fixed-rate
mortgages was 7.65 percent, the highest level since June of 1997. That
compares with 6.94 percent one year ago. Fifteen-year loans climbed to 7.26
percent, also a two-year high, from 7.13 percent the week before. The rate
for these mortgages averaged 6.62 percent for the same period last year.
One-year adjustable-rate mortgages rose to 5.94 percent from last week's 5.92
percent. A year ago, the rate was 5.68 percent.
Fortunately, Freddie Mac predicts that rates will fall at least slightly,
perhaps as soon as a week. Last week's increase was largely due to inflation
jitters, according to Robert Van Order, chief economist for Freddie Mac:
"Although Freddie Mac's weekly survey showed mortgage rates rising, they
actually began to fall off after the Consumer Price Index was released
What's the longer term outlook? Van Order expects mortgage rates to hover
around 7.5 percent until the end of the June. The financial markets are
waiting anxiously till then to see what the Federal Reserve Board will do
about interest rates. Fed Chairman Alan Greenspan has signaled that any rate
increase would be modest.
Fluctuations are creating uncertainty for bargain-hungry home buyers trying to
decide whether to lock-in their interest rate or "float" with the market.
How do you know when to lock-in? If you have a sure answer to that question,
you're way ahead of most serious financial investors.
Just remember that locks are available for varying time spans, from 10 days
to 120 days. The lock-in can include just the interest rate or both points
and interest rate. In a fluctuating market you'll need to decide for
yourself if locking-in is a good idea. Shop around for the best rate and
lock-in terms available. And whatever you do, get the lock-in agreement in