AgentIndustry News

Long-term real estate rates refuse to rise

But borrowers with adjustable loans will soon feel pinch

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Long-term rates are stuck. After a November scare at 4.65 percent, the 10-year T-note has stayed within a whisper of 4.5 percent, which in turn has kept low-fee fixed-rate mortgages close to 6.25 percent. Short-term rates will continue their grinding rise on Tuesday when the Fed goes to 4.25 percent. "Prime" will go to 7.25 percent -- mechanically 3 percent above Fed funds. Home equity lines of credit all float with prime (big lines and good credit float slightly under prime; small and/or shaky, 1 percent or 2 percent over), as do all construction loans (rarely as little as .5 percent over prime; usually 1 percent or more over). Adjustable-rate-mortgage (ARM) indices will rise in two broad groups: quick-reacting and lagging. The 1-year T-bill index will move toward 4.5 percent this month, and one-year LIBOR close to 5 percent; the laggers, COFI and MTA (both weighted averages of rates 12 to 18 months back), will rise to roughly 3.15 percent and 3.6 percent, respectively. ARM "margins"...