U.S. Interest Rates and Averages

Interest rates are the costs for borrowing money. The calculation for an interest rate is a simple expression of interest payments as a percentage of principal. Benchmark interest rates are set by an entities like the Federal Reserve, government, or a bank and are used to peg other consumer and commercial interest rates. These interest rates determine what we owe on mortgages, credit cards, and loans, as well as what we earn on CDs, savings accounts, money market accounts, and checking accounts. MoneyRates.com tracks the latest interest rate news and changes.

Mortgage rates remain close to record low levels according to the most recent survey of American lenders from Freddie Mac. The weekly mortgage report indicates that the the national average on mortgages is 4.56% for a 30-year fixed and 4.03% for a 15-year fixed. Adjustable-rate mortgages indexed to US Treasury yields were lower last week according to the Freddie Mac report. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) fell to 3.79 percent and the 1-year Treasury-indexed ARM averaged decreased to 3.70 percent. Adjustable rate mortgages tied to the LIBOR index, a common interest rate benchmark, are also slightly lower this week.

Interest rates are forecast to remain low for a more extended period than previously forecast, largely because the Federal Reserve remains committed to maintain a policy of ultra-low interest rates. The released minutes from the last meeting of the FOMC suggest that the majority of Fed policy-makers are currently weighing the risks of economic slowdown as greater than those of inflation. Until economic activity picks up again in the US, it appears the Fed is satisfied keeping the federal funds rate set at 0.25% and the discount rate set at 3.25%.The biggest catalyst for the record low mortgage rates in the US has been the continued support of the Federal Reserve of the housing market and the strong demand from investors for US Treasuries. Mortgage rates have been attractive enough to homeowners keep lenders busy with refinancings. Homeowners with fixed mortgages over 5.25% or variable-rate mortgages tied to interest-rate indexes have been advised to compare refinancing rates before interest rates increase again from today's present levels. Check MoneyRates.com for the best mortgage rates and deals.

Short-term US Treasury yields have stayed in a very narrow range for the first twenty days of of July. The 90-day T-Bill is currently yielding 0.15% and the one-year T-Bill is yielding 0.29%, nearly unchanged from the yields that they ended with in June. On the longer side of the yield curve, the benchmark 10-year Treasury note is has inched up to a 3.03% yield, just four basis points higher from where it started the month. The 10-year note can react strongly with economic news and releases and is closely watched by economists. If inflation crops up in the economy, some economists warn that the 10-year yield could reach 4.50% relatively quickly. If yields increase too quickly, investors who own fixed-income securities like government bond funds could see a sudden loss in value. Americans with home equity loans and credit cards that are indexed to Treasury yield averages should also be careful to follow the Treasury yield trend. The question still remains for savers: When will savings rates finally increase? Unfortunately, savers may have a long wait before they see the +3% savings rates that they crave for their CDs, money market accounts, and savings accounts, because the forecast for higher interest rates is for 2011 and not 2010. Check MoneyRates.com daily for the latest interest rate news and forecasts.