According to Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis, “Mortgage rates won't stimulate demand. The Fed may be a little impotent here because what caused this housing crash was overpriced housing, not mortgages.''
The average 30-year fixed mortgage rose 0.10 of a percentage point to 6.08 percent today, according to North Palm Beach, Florida-based Bankrate.com's survey of banks and lenders in the 50 U.S. states. It peaked this year at 6.42 percent on June 14, Bankrate.com said.
The housing industry, now in the second year of its worst recession since 1991, erased 0.6 percent from gross domestic product in the second quarter. Home prices probably will fall on a year-over-year basis for the first time since the Great Depression of the 1930s, Anderson said.
Investors concerned about inflation following the Fed's half-point interest rate cut have driven up the yield of 10-year Treasury notes by 23 basis points, or 0.23 of a percentage point, to 4.7 percent. The increase has dashed hopes that lower home-loan costs might entice more Americans to overcome their fear of falling prices and buy homes.
The Sept. 18 decision by the Federal Open Market Committee to reduce its benchmark interest rate to 4.75 percent from 5.25 percent doesn't mean mortgages will follow, said Michael Darda, chief economist at the equity trading and research firm MKM Partners LP in Greenwich, Connecticut.