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Wednesday, June 13, 2007

Economic growth pushes mortgage rates higher



No interest cuts any time soon!



A key mortgage rate rose to its highest level in 10 months, propelled by better-than-expected economic growth and a realization among investors that there will be no interest rate cuts from the Fed any time soon.

The benchmark 30-year, fixed-rate mortgage rose 14 basis points to 6.61 percent,a Bankrate.com national survey of large lenders found.

A basis point is one-hundredth of 1 percentage point. The last time the 30-year, fixed-rate mortgage was higher was Aug. 2, 2006, when it was 6.65 percent.

The mortgages in this week's survey had an average total of 0.26 discount and origination points. One year ago, the mortgage index was 6.69 percent; four weeks ago, it was 6.29 percent.

The 15-year, fixed-rate mortgage rose 12 basis points, to 6.33 percent. The 5/1 adjustable-rate mortgage rose 15 basis points, to 6.52 percent.

A strong report on the service sector's growth helped push rates higher. Analysts had predicted a slowdown. Instead, the nation's dominant employment sector shot up, the Institute for Supply Management's services index indicates.

Fast growth in the sector would tend to be inflationary, since it could require wage increases for a fast-growing economy to find workers. In addition, Fed Chairman Ben Bernanke repeated an inflation warning.

In a speech delivered to a monetary policy conference in South Africa, he sounded the inflation alarm this way: "Although core inflation seems likely to moderate gradually over time, the risks to this forecast remain to the upside".

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