Credit Unions Boost Short-Term LoanRates

WASHINGTON - (07/08/04 -- Credit unions responded quickly tolast week's 25-basis point in the Fed Funds rate by raising theirrates on short-term loans. Data compiled by DataTrac Corp., whichtracks rates for 1,000 credit unions, shows the average rates oncar loans and short-term adjustable-rate mortgages moved up a fewbasis points since the Fed's action last week. But rates onlong-term loans, like 15- and 30-year, fixed-rate mortgagesdeclined slightly, as the market had adjusted weeks before based onexpectation of the Fed's action, according to observers. BillHampel, chief economist for CUNA, said loan rates, especially thosefor car and home equity loans, will probably be the mostimmediately impacted by the Fed's action. "The home equity loanrate is going to bump up almost immediately with the Prime," saidHampel, noting HELOC rates are closely tied to the Prime rate. ARMrates showed the greatest impact, with credit union averages forone-year ARMs rising five bps to 4.03%; for three/one ARMs by sevenbps to 4.74%; and for five/one ARMs by nine bps to5.18%.