Underlying the rate worries, bonds -- whose fixed return makes them linked to interest rate and inflation expectations - also weakened.
Take, for example, one indicator of the market's appetite for risk, the spread between swaps of fixed- and floating-rate interest payments (see chart).
With bond yields rising since the Fed announced QE2, 30-year fixed rate mortgage interest rates went up to their highest level since the week of September 30 to 4.46%.
It comes about because the Federal Reserve System, in its so far failed effort to stimulate the economy, has fixed the short-term interest rate at 0%.
Variable-rate loans have lower initial rates than fixed-rate loans but can be more costly if interest rates rise.
Another reason demand for the long bond has been so voracious is that a lot of investment banks still use them to hedge their corporate-bond positions and interest-rate swaps (between fixed- and floating-rate obligations).
Lenders' standard variable rate (SVR) deals are tending to be more attractive than new fixed-rate deals for owners, with interest rates having plunged in recent months.
Loans from any of these sources can come in a number of flavors, including fixed interest rate or adjustable interest rate, and with various terms, from 5 years for some adjustable-rate loans up to 40 years for some.
Interest on a fixed-rate mortgage would be 2% higher than his current deal, he says.
It allows a homeowner to refinance her mortgage with a low-interest, fixed-rate loan, even if she owes more than her home is worth.
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The ones that do pay interest resemble ordinary fixed-rate bonds.
JPMorgan Chase, Citigroup and Bank of America struggled with fixed-income trading, especially in interest rate positions, while Goldman Sachs, Lehman Brothers and Morgan Stanley recorded record gains, largely on interest rate bets.
During the mortgage crisis, the vast majority of jumbos were adjustable-rate mortgages and hybrid adjustable-rate mortgages, which started at low fixed rates and switched to adjustable interest rates at the end of a set time period typically of five, seven or 10 years, said Keith Gumbinger, vice president at HSH.com, a mortgage-information website.
Keep in mind that municipal securities are subject to a number of risks including, but not limited to: Interest Rate Risk, the risk that the market value of fixed-income securities may fluctuate when interest rates change, and Prepayment Risk, the risk that the issuers of individual securities may prepay them at a time when interest rates have declined.
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In the euro area, it is much harder to turn capital gains into cash by borrowing more as home prices rise or to benefit from falling interest rates by refinancing fixed-rate mortgages, both of which have given a big boost to American household spending.
But such mortgages are cheaper than fixed-rate mortgages, because they shift the risk of interest-rate fluctuations from lender to borrower.
But that clarity is good clarity, especially at a time when individual investors have low confidence in Wall Street and few options to find fixed-income returns given the low-interest-rate environment.
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Someone with good credit and enough cash for a 20% down payment will spend more on interest for a 30-year fixed-rate mortgage in California than in Texas.
Series I bonds consist of two components: a fixed interest rate return and an adjustable inflation-linked return, making them somewhat similar to TIPS. The fixed rate never changes, but the inflation return rate is adjusted every six months and can also be negative (which of course brings your total return down).
The average interest rate on a 30-year fixed-rate mortgage in the US is now just over 3.9%.
In 1990, the average 30-year fixed rate mortgage was more than 10% but mortgage interest payments were only 4.3 percent of expenditures.
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The average interest rate for standard 30-year fixed-rate mortgages fell to 6.01% during the week ending April 25, from 6.04% the previous week.
Interest rates for 30-year, fixed-rate jumbo mortgages were 3.87% on May 10, significantly lower than 4.63% in April 2012, according to the Mortgage Bankers Association.
Like other fixed exchange-rate systems, currency boards prevent governments from setting their own interest rates.
Currently, a parent can sell shares of the family-owned business to the child for a fixed long term interest rate as low as 2.52%, and not incur a gift tax because of the loan rate.
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This trend has been reinforced by the UK's largest lender, the Halifax, which will increase the interest rate on its new three-year fixed-rate deal for customers who want to borrow between 75% and 90% of a property's value from 13 June.
It would also reduce interest costs on their alternative--switching to a fixed-rate mortgage--provided they can still go that route.
For one thing, it is hard to know how much companies have in fact lengthened the maturity of their debts because the interest-rate swap market allows them to swap those fixed bond payments into cheaper floating debt, a popular strategy in the investment-grade market.
Fixed-income fund investors are seeking any advantage they can find in this low interest rate environment.
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