The Conundrum continues:
I cannot find my notes on where this is from, but it looks like the WSJ:
DESPITE THE FEDERAL RESERVE’S rate raising campaign started June 30, 2004, fixed mortgage rates are lower now than they were a year ago.
The average rate on a 30-year fixed mortgage is 5.66%, down from 6.30% a year ago, according to Bankrate.com’s national weekly survey of large lenders. As for one-year adjustable-rate mortgages, the rate is 4.69%, up slightly from 4.43% in June 2004.
While fixed mortgage rates don’t move in lock-step with Fed actions, they do tend to be responsive to rate decisions. So the decline in mortgage rates has surprised some economists. At the beginning of the year, economic forecasts from several associations called for fixed mortgage rates to end 2005 near 6.5%. Now, some economists are revising their estimates downward, to 6%.
What’s different? One factor is that the core consumer price index, a key inflation indicator that some say has a direct effect on mortgage rates, increased rapidly during the second half of 2004, and economists expected the pace to continue.
But the CPI has plateaued in 2005, remaining at 2.2% through May. "It put inflation fears away and has allowed long term rates to remain low," says Lawrence Yun, economist for the National Association of Realtors. –Steven Sloan