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News Article From: 06-17-2007

Mortgage rates up sharply in month

Russ Wiles
The Arizona Republic
Jun. 17, 2007 12:00 AM

If you blinked, you might have missed the jump in mortgage rates.

Responding to action in the bond market, lenders have pushed up interest rates on many types of loans, including the 30-year fixed variety that's favored by so many borrowers.

"Fixed mortgage rates have risen by more than half a percentage point in the last month," said Greg McBride, senior financial analyst at rate-tracker Bankrate.com.

For a person seeking a $300,000 fixed mortgage, a half-point hike adds about $100 to the monthly payment.

Julie Alsayed, a vice president at Bank of Arizona, said she hasn't noticed any drop in mortgage business yet. "But some of my clients wished they had locked in rates weeks ago," she said.

Rates have risen as bond-market investors came to realize the Federal Reserve isn't likely to cut interest rates near term with inflation pressures still visible and the economy growing. Bond-market action influences mortgage rates.

Rates on 30-year fixed mortgages have jumped from a March average low of 6.16 percent to 6.84 percent, McBride said. Mortgages with adjustable rates also are climbing. Even with the upticks, people with adjustable-rate loans should try to refinance into fixed loans, McBride advises, as ARM rates are still rising.

"For people facing adjustable-rate resets," he said, "fixed loans are still the place to be."

Phoenix investment managers Harry and Roy Papp believe a five-year stretch of plentiful money probably is at an end.

"If we're right, liquidity will continue drying up and this will produce somewhat higher interest rates," they wrote last week.

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