Frank Nothaft Interest Quotations

Mortgage interest rates were up this week on news that February employment figures suggested an economic upturn. That news, however, puts a bit of upward pressure on long-term mortgage rates.

Mortgage rates continued to set records. Interest rates remain the lowest in Freddie Mac history; indeed, they are the lowest we have seen since 1967.

There is a slight chance the Federal Reserve Board will raise rates when it meets later this month, but with the current labor market and slowing consumer spending, it is more likely that it will take no action until August at the earliest. As a result, short-term interest rates, such as the one-year adjustable-rate mortgage, drifted further down this week.

The strength in employment growth and an unexpected jump in consumer credit in January helped push mortgage rates a little higher this week. While long-term interest rates are at the highest level since May of 1998, they are still very affordable, particularly when compared to the 1970s and 1980s.

With productivity up and inflationary pressures muted, the Federal Reserve Board elected this week not to change a key short-term interest rate. Moreover, most other economic data releases, such as unemployment and manufacturing, painted a slightly negative picture for future economic growth. These factors combined to keep mortgage rates stable.

Consumer spending has kept the economy moving, and when initial holiday sales were better than expected, financial markets reacted with enthusiasm. It was this potential pick-up in the economy that caused interest rates, including mortgage rates, to drift upwards this week.

At this time last year, our forecast called for interest rates for 30-year fixed-rate mortgages to exceed six percent by this time this year,

The Federal Reserve's recent cut in interest rates and a continued concern over weakness in the overall economy contributed to another drop in mortgage rates this week. In spite of the slowdown in other sectors and a lessening of consumer confidence, declining mortgage rates since the first of the year have helped to support housing activity.

Anticipation that the Federal Reserve may well cut rates at its next meeting, combined with further weakness in certain sectors of the economy, caused interest rates to fall again.