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With fears that inflation may still be a threat, there is the expectation that the Federal Reserve will be raising interest rates again in their June meeting. This is causing the rates for all different forms of mortgages to go up slightly. The residential real estate market is slowing in conjunction with the rising interest rates and the peaking of a very hot market.

Freddie Mac, the mortgage company, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.63 percent, up slightly from 6.62 percent last week, and a full percentage point above where they were a year ago.

Rates on 30-year mortgages had fallen last week after hitting a high the previous week of 6.67 percent, the highest level in nearly four years.

The housing sector, which has enjoyed five boom years, is exhibiting numerous signs of slowing under the impact of rising mortgage rates. Analysts are predicting that sales will decline by around 10 percent this year as a gradual increase in mortgage rates cools activity.

“There has been no drastic movement in mortgage rates and we see nothing on the horizon that would bring about any extreme rise or fall in rates going forward,” said Frank Nothaft, chief economist at Freddie Mac.

Federal Reserve Chairman Ben Bernanke jolted financial markets last week by indicating that inflation was still a major concern at the Fed. On Wednesday, the government reported that core inflation, excluding energy and food, was rising during the past three months at the fastest pace in 11 years.

Analysts said the news on inflation made a 17th quarter-point rate hike a virtual certainty when the Fed next meets on June 28-29. via the Washington Post

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