Stronger Economic Growth Translates Into Rising Rates
October 8, 2004
Even One-Year ARM Responds To News Of Growing Economy
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage (FRM) averaged 5.82 percent, with an average 0.6 points, for the week ending October 7, 2004, up from last week when it averaged 5.72 percent. Last year at this time, the 30-year FRM averaged 5.77 percent.
The average for the 15-year FRM this week is 5.24 percent, with an average 0.6 points, also up from last week when it averaged 5.12 percent. A year ago, the 15-year FRM averaged 5.10 percent.
One-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 4.08 percent this week, with an average 0.6 point, up from last week when it averaged 3.97 percent. At this time last year, the one-year ARM averaged 3.72 percent.
"The financial market thinks we've passed the 'soft patch' in the economy, which would translate into stronger growth in the coming months," said Amy Crews Cutts, Freddie Mac deputy chief economist. "Stronger growth means a greater threat of inflation and that means interest rates will start to rise in response to the threat.
"That said, today's rates are still a great bargain compared to even just a few years ago when long term mortgage rates astounded the industry by falling to about seven percent and even lower. Better yet, our current forecast calls for rates to remain at low levels through the end of next year."
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Source: Freddie Mac