Lending Landscape - February 28, 2008

The lending landscape is getting more muddled as long term mortgage rates continue to rise, despite efforts from the Federal Reserve board to keep them low. Over the past week, fixed rates have increased to levels we saw last November.

The government-sponsored loan buyer said 30-year fixed-rate loans averaged 6.24% for the week ending Thursday, up from 6.04% last week.

Last year at this time, the 30-year rate averaged 6.18%, Freddie Mac said.

Short term rates were up slightly this week, but are still far below last year's levels. In testimony to Congress this week, Fed chairman Ben Bernanke indicated willingness to cut rates further at the next meeting in March. This should provide additional downward pressure on adjustable rate mortgages.

The Fed has had great difficulty controlling long term rates. When they wanted higher rates, long term rates stubbornly held level. Now that they want lower rates, the trend is reversing. One thing is certain and that is the markets are volatile. Even though rates trended up last week, as of this writing they appear to be headed down.

For new home buyers in Utah it's important to consider that an adjustable rate mortgage may be of benefit given the downward trend in short term rates. Further, long close dates, particularly for new construction could possibly allow a clearer economic picture to emerge.