Interest rates on long-term mortgages have risen sharply in the last couple of weeks. Last Thursday, Freddie Mac announced that the average 30 year fixed rate mortgage stood at 6.74% -- the highest it's been in nearly a year.

"Mortgage rates moved sharply upward this week, with rates on 30-year fixed-rate mortgages jumping more than 20 basis points, the largest upward movement in over three years," said Frank Nothaft, Freddie Mac vice president and chief economist. "These moves parallel rising yields on Treasury securities, as concerns about inflation pressures and continuing strength of consumer and business spending have dimmed hopes for an interest rate cut."

Let me get it out of my system up front, so I can focus on what this information means to us:

I TOLD YOU SO!!

Thanks. I feel better already.

Before I get into what you should do with this information, let's go a level or two beneath the headlines to see what's going on that has caused rates to spike in the last couple of weeks.

The global economy is facing inflationary pressure these days -- and that's not a bad thing, in many ways, since it shows good growth globally. The European Central Bank raised its interest rates to their highest level in six years (back to pre-9/11 levels) last week, and the central banks of England, Canada and Japan are expected to follow suit in the coming months -- so the market forces at work are not limited to the United States.

Here in the US, the service economy is running strong, which means that unemployment figures are down. Despite the fact that we're still setting records for foreclosures (which hurts the housing market by dumping more homes into the "for sale" inventory), housing has not crashed -- the fact is that if people have jobs, they like to own their own homes.

This brings me to what to do with this information:

1. In the short term, wait until Thursday
2. Beyond that, if you still have an adjustable rate mortgage, it's as important as ever to look at refinancing -- but keep an eye on fees with your new lender

Here's what I mean on both points:

1. This week's economic calendar has its most important data coming in on Thursday (initial jobless claims and Philadelphia Fed index) -- good news on Thursday will push rates even higher. My take on this is that rates are so much higher right now than they were a month ago that further increases are becoming less likely.
2. We've already seen that interest rates are rising globally; that means that if you're in an adjustable rate mortgage, your low interest rate is even more likely to reset higher than today's 30-year fixed rate loans. They're rising together. The key in a refinance is to be sure that the rate and fees you're getting are as low as they can be. One reason that I like Clarion Mortgage is that they allow me to be incredibly competitive -- we're large enough to enjoy discounts, and Clarion's whole business model is built on efficiency: If mortgage capital is water flowing from Wall Street to your closing table, then Clarion Mortgage is a pipe that leaks less than any other I've seen.
   

Our fee structure is lean -- tomorrow I'm closing a loan for a client who shopped aggressively and found that through Clarion, I could save him significant month every month on his mortgage.