Posted on: Friday, October 10, 2003

Economic signs of revival boost mortgage rates

By Jeannine Aversa
Associated Press

WASHINGTON — After a month of declines, rates on benchmark 30-year mortgages rose sharply this week amid increasing signs the economic rebound is gaining momentum.

For the week ending today, the average rate on 30-year mortgages increased to 5.95 percent, compared with 5.77 percent a week ago, the mortgage company Freddie Mac reported yesterday in its weekly nationwide survey.

Rates had dipped to 5.21 percent in mid-June, the lowest in more than four decades, before climbing again later in the month.

Economists said a factor in this week's increase were signs of an economic revival. That pushed bonds rates higher, causing long-term mortgage rates to rise.

Even with the recent gyration in mortgage rates, sales of new homes and previously owned ones are expected to hit new record highs this year of 1.05 million units and 5.89 million units, respectively, predicted David Lereah, chief economist at the National Association of Realtors.

Home-mortgage activity, too, remains healthy.

The Mortgage Bankers Association of America said that refinancing accounted for 55 percent of all mortgage applications filed last week, compared with 53.1 percent in the previous week.

Frank Nothaft, Freddie Mac's chief economist, said he believes that rates on 30-year mortgages should average between 6 percent and 6.25 percent between now and the end of the year, which would be low by historical standards.

Rates on 15-year mortgages, a popular option for refinancing, also went up this week, to 5.26 percent, compared with 5.10 percent the previous week.

But rates for one-year adjustable mortgages fell to 3.69 percent this week from 3.72 percent.

The nationwide averages for mortgage rates do not include add-on fees known as points.

Each loan type carried an average fee of 0.6 point this week.

A year ago, rates on 30-year mortgages averaged 5.98 percent, 15-year mortgages were 5.34 percent and one-year adjustable mortgages stood at 4.23 percent.