Mortgage rates likely to dip

Nation's Business, June, 1987 by Joan C. Szabo

Mortgage Rates Likely To Dip Mortgages rates recently spurted ahead along with other interest levels, but housing analysts maintain that the jump in that industry will be short-lived and that rates should again drop a bit.

On average, lenders recently asked 10.2 percent for 30-year, conventional fixed rate mortgages, according to the Federal Home Loan Mortgage Corporation. That is up more than one percentage point from early March, when rates were down to nearly 9 percent, and up from the same time last year, when they were 9.9 percent.

In addition, the government recently boosted the maximum rate on Veterans Administration guaranteed home mortgages a full point to 9.5 percent, reversing a two-year decline.

Analysts attribute the runup in rates to the weakness of the dollar and the recent increase in the prime lending rate. Banks nationwide boosted that rat from 7.5 to 7.75 in late March and to 8 percent at the end of April.

The analysts say, however, that the unusual mix of economic factors, some of them based on international exchange rates and some of them psychological, will not affect mortgage rates to the same extent as interest rates generally.

One factor in the volatility in home loan rates is the procedure in which most fixed-rate mortgages are bundled into securities and sold to big investors such as pension funds. These investors look for yields similar to federal or corporate bonds. The recent higher rates in the bond market have rapidly spilled over to the mortgage market.