Interest Rate Update from HSH Associates

Excerpts from HSH Associates newsletter for week ending 12/22/06:

Mortgage interest rates nudged higher this week, as the average for the benchmark 30-year fixed rate mortgage (FRM) climbed by four basis points (.04%) to finish the nation’s leading mortgage pricing survey at 6.25%. Hybrid five-one ARMs bumped higher by five basis points, closing the week at an average 6.09%. Both rates remain comparable with those seen at the beginning of 2006 — no mean feat considering the upward pressures on rates for at least half of the year.

A weakening economy with softly waning inflation pressure is to thank for the easing in rates for the latter part of 2006. As well, appetite for mortgage and Treasury bonds from investors served to continue the conundrum of why short- and long-term interest rates remain so near one another. That flat yield curve has given many holders of adjustable rate mortgages at least a reasonable opportunity to refinance away from higher interest rates and payments into products more suited to their budget.

We are closing the year in typical fashion, with muted moves for mortgage rates. That will continue next week, as thinly-populated markets and holiday cheer continue to move markets to the back burner. Some additional data concerning manufacturing is due out, as are home sales numbers, but it’s unlikely that anything will be sufficient to move rates to any great degree. The upward pressure of the past two weeks seems to be largely realized, so next week might see rates move just another basis point or two upward.

                                                          Fixed Rate               Variable

Survey Area	15 Year	30 Year	Composite	1 Year	Composite
NW/National	5.97%	6.25%	6.11%	5.87%	6.07%
CA/Statewide	5.99%	6.31%	6.17%	5.86%	6.02%

Data above include both conforming and jumbo loans for “A” credit borrowers and include a wide range of LTV and discount structures.