After rising one-half percentage point in a three week span, mortgage rates halted the advance this week as investors began to realize that the Fed's tough talk on inflation would remain just that -- talk. While the Federal Open Market Committee has shifted the focus to inflation, any interest rate hike is unlikely in the near term given the weak economic growth and ailing housing market. In the meantime, we can expect more "jawboning" by the Fed as the economic and inflation pictures come into clearer focus. Fixed mortgage rates are closely related to yields on long-term government bonds, and both are heavily influenced by the outlook for the economy and inflation.
Although mortgage rates were unchanged this week, they have been on a wild ride since the beginning of the year. The average 30-year fixed mortgage rate was as low as 5.57 percent in January, meaning that a $200,000 loan would have carried a monthly payment of $1,144.38. But at today's rate of 6.62 percent, a $200,000 loan would mean a monthly payment of $1,279.96.
