Mortgage rates appear likely to hold steady

October 27, 1991|By Scott Pendleton | Scott Pendleton,The Christian Science Monitor

AUSTIN, Texas -- Mortgage interest rates, which have been dropping steadily, are likely to remain stable for the next few months, economists say.

The core rate of inflation, which is the consumer price index excluding volatile food and energy prices, is dropping toward 4 percent, says Norman Fieleke, an economist with the Federal Reserve Bank of Boston.

"That's all known and incorporated into rates," says Tom Holloway, senior economist at the Mortgage Bankers Association America.

He argues that mortgage interest rates won't get much lower -- or higher. The outlook is "relatively flat," adds Richard Peterson, chief economist at Continental Bank in Chicago.

Frank Nothaft, deputy chief economist at the Federal Home Loan Mortgage Corporation, agrees that "the most likely scenario" is for rates to hold firm for at least two months. Others say six months.

However, people contemplating a home purchase "shouldn't wait," Mr. Nothaft advises. Another three-quarter percentage point decline in interest rates is "extremely unlikely."

Economists say the recession started in July 1990.

Revised statistics show national output still declining at a 0.5 percent annual rate in the second quarter of this year. A feeble recovery has begun by now, most economists say, but an actual date for the turnaround remains uncertain. With that in mind, the Federal Reserve is expected to maintain the availability of credit to banks or even ease interest rates further.

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