THE BASIS POINT

WeeklyBasis 10/31/05: Rates May Climb A Bit More

In the past three weeks, fixed and ARM rates are up about .375%. Last week, the yield on the 10-year note (a critical benchmark for fixed mortgages and intermediate-term ARMs) was up 0.19% to hit 4.60%, which is just shy of the 4.69% high of 2005 which came on March 23. We may see more upward movement this week. The Fed’s second-to-last rate policy meeting of 2005 is Tuesday. We can expect them to hike the Fed Funds Rate (an overnight bank-to-bank lending rate that’s a benchmark for shorter-term mortgages) from 3.75% to 4.0%. Given the inflationary warnings Fed officials have doled out in recent weeks, we should NOT expect Greenspan nor his successor Ben Bernanke to suggest rate increases are near the end.This week, we also have manufacturing activity data on Tuesday, services industry productivity Wednesday and October jobs growth Friday. The jobs report always moves markets, and if these post-Katrina jobs numbers stay low like they were last month, it could help keep rates from spiking. If you sense your clients are nervous about rates, remind them that this is a normal economic cycle, and the rate movement we are experiencing is actually very orderly relative to other increasing-rate environments. The markets will do what they’re going to do. If we keep our clients focused on their own financial objectives, and their own time horizons, they will succeed over full market cycles.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year: 6.125% (6.265 % APR)
15 Year: 5.75% (5.89% APR)
5/1 ARM: 5.875% (6.025% APR)

Jumbo ($359,651 – $650,000) – NO POINTS
30 Year: 6.5% (6.64% APR)
15 Year: 6.125% (6.265% APR)
5/1 ARM: 6.0% (6.15% APR)