Prospective buyers and homeowners looking to refinance their existing loans who felt ill for not snatching up record-low home loans in early October probably turned a deeper shade of green this week as mortgage rates ticked upward for the fourth week in a row.

Freddie Mac reported 30-year loans across the nation averaged 6.93 percent, up for the fourth consecutive week from 6.89 percent last week. Freddie Mac tallies average nationwide mortgage rates Thursday through Wednesday every week.

Average 30-year rates hit a 31-year low of 6.49 percent Oct. 8. If homeowners financed a $100,000 at that rate, they're paying just $631 a month for their mortgage. Homeowners who secured a 6.93 percent loan this week will pay $660 a month for their house.

In the big picture, of course, mortgage rates are still historically cheap. In the first quarter of 1998, a 6.93 percent loan was considered a great deal.

Fixed 15-year rates, the preferred vehicle for refinancings, also rose again, up to 6.57 percent from 6.5 percent. One-year adjustable loans also jumped, up to 5.56 percent from 5.48 percent.

"Mortgage rates are remaining fairly steady, due largely to the recent stabilization in the bond market," said Robert Van Order, chief economist for Freddie Mac. "The next event to watch for that may affect interest rates is the Fed's Open Market Committee meeting scheduled for November 17. Until then, Freddie Mac economists don't see any big change in the cost of borrowing in either direction."

Others agreed that buyers and lenders should keep a close watch on the Federal Reserve's interest rate moves next week.

The stormy economic forecast that prompted back-to-back cuts in September and October have brightened, but enough threats to growth remain, analysts say.

The Fed may well cut rates by an additional quarter point, bringing the federal funds rate down to 4.75%, before the end of the year, Business Week reports.

Despite the healthy economic data and revived stock indexes, Fed officials continue to worry that slowing U.S. factories, continuing distress overseas, and unsettled credit markets pose threats to next year's economy. Those factors, they contend, outweigh the risk of overstimulation.

The rising mortgage interest rates have put a slight damper on borrowing, according to the Mortgage Bankers Association of America.

Applications for U.S. mortgages dropped last week to the lowest level since the end of August and refinancing activity slowed as borrowing costs for home purchases got more expensive, mortgage industry figures showed.

The mortgage applications index declined 6.6 percent to 540.5 in the week ended Nov. 6 from 578.8 in the previous week, MBAA said.

The group's refinancing index fell 20.4 percent to 1987.0 last week from 2495.7 the previous week.

"There are probably some fence sitters out there waiting for lower rates," said Richard Yamarone, an economist at Argus Research Corp. in New York.

His firm likewise expects the Federal Reserve will continue to lower interest rates over the next half year to extend a U.S. expansion now in its eighth year.

According to the association, the average contract rate on 30-year fixed-rate mortgages with 20 percent down payments rose 14 basis points to 6.87 percent. Since early October, the yield on the benchmark 10-year Treasury note, which is used to calculate some mortgages, has risen from a low of 4.16 percent. The yield on the 10- year note was at 4.82 percent Wednesday.

The association report measures how many applications U.S. mortgage bankers receive each week, adjusted for seasonal changes and holidays.

The lowest regional 30-year fixed mortgage rates were found in the Northwest, according to Freddie Mac, which had an average of 6.89% with 1.1 in points and fees. The West followed with an average rate of 6.91%, with 1.1 in points in fees. The Southwest followed closely with 6.92% with 1.0 in points and fees, while the Southeast post an average rate of 6.94% with 0.9 in points and fees. Only the North Central region broke the 7% mark, posting an average of 7.02% with 0.7 in points and fees.

Published: November 17, 1998

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