HONOLULU -- A recent rise in long-term interest rates in the bond market has local banks holding mortgage rates steady, despite the Federal Reserve's decision, after the recent terrorist attacks in New York and Washington, to drop short-term interest rates by a half-point.

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That's because the bond interest rate is tied to mortgage rates. When it goes up, so does the interest charged by lenders.

"The institutional lenders held steady today, which is great," mortgage broker Tim O'Leary said. "It shows that there's some confidence. The little adjustments we saw, slightly knee-jerk reaction."

According to O'Leary, 30-year fixed mortgages are still going for 6.5 percent. He is advising clients who have been hesitating to refinance to lock in -- to be safe.

"We're talking a short-term here," he said. "It's like a 30- to 60-day period."

Money manager Harlan Cadinha of Cardinha and Co. said that the bond selloff could be caused by fear that all the government spending being pledged for rebuilding and retaliation will cause inflation.

But there is another school of thought.

"Foreigners with money in the U.S. are getting concerned," he said. "And the dollar was weak, and typically when foreigners make investments in the U.S., it's in the treasury bond market."

Cadinha does not believe inflation will occur -- and he agrees with O'Leary that ultimately bonds will once again be sought as safe havens for investors and that interest rates will drop.