Mortgage rates move higher, with even higher likely to come

By Palm Beach

DELRAY BEACH — The great mortgage rate surge continues with no end in sight.

Freddie Mac’s latest Primary Mortgage Market Survey found the 30-year fixed-rate mortgage averaged 5.59 percent, with an average 0.7 point, up from last week’s 5.29 percent. Still, rates are considerably lower than a year ago, when the 30-year was at 6.32 percent.

Still, it’s highest point for the 30-year since Nov. 26.

Meanwhile,’s weekly national survey put the 30-year at 5.95 percent with an average 0.42 point, up from 5.65 percent a week ago.

The higher rates have put a serious dent into refinancing, but have yet to affect home sales, according to Freddie Mac Chief Economist Frank Nothaft said.

The reason behind the rise in rates? An improving economy, or at least one that’s deteriorating less rapidly than earlier in the year. Investors are taking it as signs that the Federal Reserve might raise interest rates  sooner than later.

“Mortgage rates followed the increase in bond yields this week as the May employment report showed that the economy lost fewer jobs than the market consensus had expected,” said Nothaft said. “Revisions to the jobs report for earlier months also showed the job loss was not as large as early estimates had indicated: March and April figures were revised to add an additional 82,000 jobs to the work force. As a result, federal funds futures rose after the report, signaling that the market expects the Federal Reserve may raise its benchmark rate sooner rather than later.”

The surge in rates had another effect: they boosted interest in adjustable rate mortgages. Bankrate said a few months ago, only about 1 percent of mortgage applications were for ARMs. Last week, it was 3.4 percent, according to the Mortgage Bankers Association.

Also from the Freddie Mac survey:

— The 15-year mortgage this week averaged 5.06 percent with an average 0.7 point, up from last week’s 79 percent.

— Five-year ARMs averaged 5.17 percent this week, with an average 0.6 point, up from last week’s 4.85 percent.

— One-year ARMs averaged 5.04 percent with an average 0.7 point, up from last week’s 4.81 percent. It’s the highest point since December.

Also from the Bankrate survey: the average 15-year fixed rate mortgage jumped to 5.37 percent, while the average jumbo 30-year fixed rate rose to 6.96 percent. Adjustable rate mortgages were up this week as well, with the average 1-year ARM moving to 5.16 percent and the 5-year ARM climbing to 5.49 percent.

The rising mortgage rates have made it undesirable for many homeowners to refinance their mortgages. Yet there is an option left for them: the adjustable rate mortgage or ARM.

Bankrate put the current rates into perspective this way: This time last year, the average 30-year fixed mortgage rate was 6.48 percent, meaning a $200,000 loan would have carried a monthly payment of $1,261.51. With the average rate now at 5.95 percent, the monthly payment for the same loan would be $1,192.68, a savings of $68.83 per month.

Bankrate’s panel of experts sees rates rising over the next 30 to 45 days. A majority of the panelists — 57 percent — sees higher rates, while 29 percent see a decline.

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JUNE 11, 2009 click to go home
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