Gentle Slowdown of price increases

This is the third straight week of rate increases for 30 year fixed loans. They rose nearly a tenth of a point.

"Freddie Mac said the 30-year fixed-rate mortgage averaged 5.73%, up from 5.66% a week earlier.

The rate on 15-year fixed-rate mortgages averaged 5.32%, up from 5.25%. A year ago, the average rate on the 15-year was 5.39%.

The one-year Treasury-indexed adjustable rate mortgage averaged 4.42% vs. 4.39% a week earlier. A year ago, the one-year ARM averaged 4.12%. The last time the one-year ARM was higher was the week ending Aug. 2, 2002, when it averaged 4.45 percent.

The five-year hybrid ARM also rose to 5.26% from 5.15%.

The 30- and 15-year loans required the payment of an average 0.4 point to achieve the interest rate; the five-year hybrid needed 0.5 point and the one-year ARM needed 0.6 point. A point is 1% of the loan amount, charged as prepaid interest.

"We believe that the housing industry, although poised to ease a bit, will still continue to bustle as the economy continues to expand steadily and long-term rates remain affordable," Frank Nothaft, vice president and chief economist at Freddie Mac, said in a statement.

As the one-year ARM reaches its highest rate level in nearly three years, he said, it should be no surprise that the ARM share, based on the number of applications for a mortgage, has fallen markedly since early June.

Still, long-term mortgage rates have remained stubbornly low as the Federal Reserve has boosted short-term rates over the past 13 months. Those rates are still below 6%, close to the exceptionally low rates seen in June 2003."

The drop in ARMs is a great sign that people are beginning to realize the financial consequences of ARMS namely that any change in interest rates means a much higher payment.

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