As expected, the FOMC meeting on Tuesday resulted in an increase in the fed funds rate of 0.25% to 3.75%. In addition to the highly anticipated FOMC meeting, market was on edge last week waiting for post-Katrina economic data.
U.S. housing starts dropped by a larger-than-expected figure of 1.3% in August. Building permits were also lower than anticipated, falling 2.2% to 2.124 million-unit pace. Hurricane Katrina directly affected jobless claims. Claims rose to 432,000, the highest amount in two years. Experts link the amount of claims related to Katrina at 103,000. The index of leading economic indicators fell 0.2% in August. This shows that the U.S. economy may have been losing steam before the onslaught of Katrina.
The average contract interest rate for 30-year fixed-rate mortgages increased to 5.81 percent from 5.72 percent on week earlier,with points increasing to 1.21 from 1.18 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The average contract interest rate for one-year ARMs increased to 4.94 percent from 4.82 percent one week earlier, with points decreasing to 1.00 from 1.04 (including the origination fee) for 80 percent LTV loans.
