Fed Takes Break from Hikes

The Federal Reserve Board yesterday left short-term interest rates unchanged at 5.25 percent.

The Fed says the lull after 17 consecutive increases was because of the softening housing market, high energy prices, and previous rates increases.Home buyers "who are looking at longer-term fixed-rate products are going to get a pretty good deal," says Doug Duncan, chief economist of the Mortgage Bankers Association. Duncan believes rates on fixed-rate mortgages aren't likely to move much higher unless the Fed decides to boost rates again to stem inflationary pressures.

Yesterday, rates stood at 6.66 percent, nearly one-third of a percentage point below their recent peak of nearly 7 percent, according to financial publisher HSH Associates.

The pause also will slow the pace at which rate increases are being passed on to borrowers with adjustable-rate mortgages, though some borrowers could see their rates continue to rise if their payments are tied to an index such as the 12-month Moving Treasury Average, which reflects rate moves on a lagging basis.

Source: The Wall Street Journal, Jeff D. Opdyke, Jennifer Saranow and Ruth Simon (08/09/2006)