As reported by Thomas Fogarty in USA TODAY, mortgage interest rates hit a six-month low this week, reacting to low inflation and recent news of scant December job growth.

You see, rates are low because there is not a lot of demand from businesses to compete with the mortgage market for money. Plus in election seasons government keeps the cost of money as low as they can to stimulate the economy. You can bet when the economy picks up, rates will rise.

This week the 30-year mortgage interest rate averaged 5.66%, down from 5.87% last week. The interest rate for a 15-year home loan averaged 4.97%, down from 5.17% last week. Rates were last this low during the week ended July 11.

As Foggery states. "In the short term, the drop in what were already viewed as borrower-friendly rates will further fuel a housing market that is coming off a record-setting 2003. But industry economists in a conference call this week agreed that rates seem poised for a moderate rise of a percentage point or so during 2004, which could take the edge off the current housing market.

David Lereah of the National Association of Realtors said he expects 2004 to be the second-best year on record. Sales of existing homes should be 5.8 million this year, down from the 6.1 million record set in 2003. In the latter part of the 1990's 4-5 million resale homes sold was more the norm. His forecast presumes a modest rise in mortgage rates. But if rates spike, he said, home sales could dive. Lereah says he worries most about the potential effect of rising deficits in the federal budget and in foreign trade. The twin deficits could stoke inflation, and force interest rates higher than expected, he said.

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