WeeklyBasis 12/12/05: Rates Wait for the Fed, Will Probably Rise

After lots of volatility, fixed and ARM rates open unchanged this week for the second week in a row. Tuesday is the last Fed meeting of 2005, and we can expect them to raise the Fed Funds Rate from 4.0% to 4.25%. This is already priced into rate markets, so the actual rate move is less important for mortgage rate fluctuation than the language the Fed will use. Since the tightening cycle began in June 2004, they’ve talked repeatedly about moving away from “accommodative” rate levels at a “measured” pace. If they drop these words from the statement (which will be released at 11:15 PST), rates will probably get better. But my prediction is that they will hold off until their January 31, 2006 meeting before they start signaling an end to rate hikes. Of course, the whole point of Fed Funds Rate policy is to preemptively battle inflation, and Thursday we’ll also get a look at how they’re doing when Consumer Price Index numbers are released. Rates may rise if this number is bigger than expected. Nevertheless, rate movement for the week is mostly hinged upon the Fed statement.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.25% (6.39% APR)
15 Year: 5.875% (6.015% APR)
5/1 ARM: 6.0% (6.15% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.5% (6.64% APR)
15 Year: 6.125% (6.265% APR)
5/1 ARM: 6.125% (6.225% APR)