Interest Rate Risk Comes on the Radar Screen Again.

As mortgage lenders started reporting second-quarter results last month, most were poised to see positive servicing results as long as they didn't overhedge their asset. Long-term interest rates ended the quarter a tad higher than they were at the start. According to Freddie Mac, the average 30-year mortgage rate on conforming loans was 6.67% on June 28, compared with 6.16% on March 29.

But like clouds looming over Wimbledon just as a tennis match is about to get underway, the threat of another refinancing storm just keeps popping up on the radar screen.

Witness the movement in rates during mid-July was downward, with the average 30-year fixed-rate home loan carrying a rate of 6.63% in the week of July 4, down three basis points from a week earlier. It was the third week in a row that rates had declined. The 30-year average was also lower than it had been a year earlier.

Frank Nothaft, chief economist at Freddie Mac, said that moderation in core inflation numbers was a key factor pushing rates down in recent weeks. That has somewhat eased concern that the Federal Reserve Board would resume an upward move in short-term interest rates. But don't bet that the Fed will move rates down anytime soon.

"In the statement accompanying their decision to leave the target federal funds rate unchanged, the Fed noted that core inflation had declined recently, though a sustained moderation is still to be seen, and signaled that inflation risk continues to figure prominently in ...