Mortgage rates rise 4th straight week

Mortgage rates drifted higher again this week, responding rather torpidly to the reintroduction of 30-year Treasury notes and congressional testimony by a brand-new chairman of the Federal Reserve.

The 30-year, fixed-rate mortgage has gone up four weeks in a row. It has risen a quarter of a percentage point in that time.

The benchmark 30-year fixed-rate mortgage rose 5 basis points to 6.37 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.37 discount and origination points. One year ago, the mortgage index was 5.62 percent; four weeks ago, it was 6.12 percent.

The 15-year fixed-rate mortgage rose 7 basis points to 6.02 percent. The 5/1 adjustable-rate mortgage rose 6 basis points to 6.05 percent.

30-year bond reprise a hit

As far as mortgage rates go, the big news of the last week was the reintroduction of the 30-year bond. The federal government has to borrow money to pay for budget deficits, and it does so by selling IOUs that come in the form of U.S. Treasury notes and bonds. The federal government had stopped selling 30-year bonds in 2001 because the federal budget was in surplus and there was no need to borrow for such long terms.

But the Bush administration's borrow-and-spend policies invited the return of the 30-year Treasury. There was strong demand for the long bonds, but that translated into only a slight sell-off of 10-year Treasuries or mortgage-backed securities. As a result, the upward pressure on mortgage rates was weak. They bumped up just a little.

Then came this week's congressional testimony by Ben Bernanke, recently sworn in as chairman of the Fed. Twice a year, Congress summons the Fed chairman to deliver his assessment of the economy, and this was Bernanke's first test. He said nothing that surprised the bond markets, and his testimony didn't affect mortgage rates one way or another.

Inflation Fighter II: the sequel

Bernanke hinted that at least one more increase in short-term rates is probable. Donning the metaphorical cloak of his inscrutable predecessor, Alan Greenspan, Bernanke delivered that assessment this way: "In these circumstances, the FOMC judged that some further firming of monetary policy may be necessary, an assessment with which I concur."

Bond traders knew then that they could trust the guy. His willingness to fight inflation with further short-term rate increases means that long-term interest rates can remain reasonably low.

Bernanke made another notable observation: that "a number of indicators point to a slowing in the housing market." That's no surprise -- economists have been predicting a slowdown in the housing market for four years, and they've finally got one -- but Bernanke has his eye on a scary case scenario in which "prices and construction could decelerate more rapidly than currently seems likely."That could lead to less borrowing against home equity and less spending by homeowners -- a sequence of events that the Fed doesn't wish to happen.

Housing resales: Spottily hot

Although there are signs that some housing markets are cooling, some are still sizzling. According to the National Association of Realtors, median home resale prices went up in double digits last year in half of the metropolitan areas that the group surveys.

Of 145 metro areas, prices rose in double digits in 72. The Phoenix metropolitan area led the way, with 48.9 percent price appreciation for existing homes last year. The median home price -- the price at which half the homes cost more -- was $268,400 in the last three months of 2005, up from $180,200 a year earlier.

The rest of the top five cities all were in Florida: Cape Coral-Fort Myers, at 48 percent; Orlando, 42 percent; Ocala, 41.2 percent, and Tampa-St. Pete, 32.3 percent.

Median prices fell last year in six metro areas, according to the Realtors: South Bend-Mishawaka, Ind., fell by 5.3 percent; Springfield, Ill., 2.9 percent; Erie, Pa., 2.9 percent; Lansing-East Lansing, Mich., 1.1 percent; greater Cleveland, 0.9 percent, and greater Detroit, 0.4 percent.

What about New Orleans? The median home price rose 29.2 percent in the last year. In Gulfport-Biloxi, Miss., which got the worst of the wind and storm surge, the median home price went up 24.9 percent.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.