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Mortgage rates higher
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May 17, 2001: 12:18 p.m. ET
Fed rate cut lowers ARMs, long-term rates drift higher from previous week
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NEW YORK (CNNfn) - Mortgage rates displayed a mixed reaction to the Federal Reserve's half-percentage point interest rate cut Tuesday, with long-term mortgage rates edging slightly higher while adjustable-rates dipped from the previous week.
According to Freddie Mac, the benchmark 30-year fixed-rate mortgage (FRM) averaged 7.14 percent for the week ending May 18, up slightly from last week's average of 7.10 percent. A year ago, the same mortgage averaged 8.64 percent.
The average this week for a 15-year fixed-rate mortgage was 6.67 percent, up from the previous week's average of 6.61 percent. A year ago, the same rate stood at 8.31 percent.
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One-year adjustable-rate mortgages (ARMs) averaged 5.81 percent, down from last week's average of 5.90 percent. The same mortgage averaged 7.15 percent at this time last year.
"The Fed has cut rates by 2.5 percent this year and this is going to have a big effect on the economy in the later part of the year," said Robert Van Order, chief economist for Freddie Mac.
"The benefits of the rate cuts, however, filter into short term products, like the 1-year ARM. The spread between the 1-year ARM and the 30-year fixed-rate mortgage is now at its widest point this year at 1.33 percent. At the start of this year the spread was only 0.21 percent," Van Order said.
[Click here to see a breakdown of U.S. mortgage rates by region]
Freddie Mac (FRE: Research, Estimates), or Federal Home Mortgage Corp., is a publicly traded company the government established in 1970 to provide a flow of funds to mortgage lenders.
It buys mortgages from banks, bundles them and then resells them as mortgage-backed securities. Its products, and the products of other, similar entities, have become increasingly popular as an alternative to government-backed bonds, particularly with international investors. 
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