Recent rate reductions reverse course

      A rally in the stock markets and bearish comments made by Federal Reserve officials put upward pressure on interest rates over the past few days. Lenders responded by reversing recent reductions in mortgage rates.
      The interest rate is averaging 6.875 percent on the 30-year fixed-rate mortgage (based on zero points), 6.5 percent on the 15-year fixed-rate mortgage, and 5.75 percent for the introductory rate on the one-year adjustable-rate mortgage.
      The recent move by the Federal Reserve to cut key short-term interest rates revived investor hopes that the Fed would make additional rate cuts in the coming months. Based on these hopes, lenders lowered their mortgage rates, but raised them back only a few days later.
      Several of the nation's largest companies released better-than-expected corporate earnings, suggesting that the state of the U.S. economy is not as bad as previously thought. These favorable earnings numbers encouraged many investors to divert their money from U.S. Treasury securities to stocks.
      Investors also sold some Treasury securities on renewed concerns that the Fed may limit the number of rate cuts in the near future. Some Fed officials commented that the U.S. economy was in good shape with little chance of sinking into recession. This selling activity pushed the value of Treasuries lower, which in turn pushed their yield to investors higher.
      The direction of mortgage rates will likely depend on investor attitudes regarding the health of the U.S. economy and its impact on corporate earnings.
      --Jim De Both is president of Mortgage Market Information Services -- a national publisher of mortgage rates and information.