Posted on: Friday, June 11, 2004

Rates on mortgages continue slow rise

By Jeannine Aversa
Associated Press

WASHINGTON — Mortgage rates moved higher this week, a trend that is slowing home-mortgage refinancings but isn't expected to do much to hurt home sales, economists said.

Rates on benchmark 30-year, fixed-rate mortgages climbed to 6.30 percent for the week ending June 11, up from 6.28 percent last week, mortgage giant Freddie Mac reported yesterday in its weekly nationwide survey.

Thirty-year mortgage rates hit a low this year of 5.38 percent during the week ending March 18. Since then, they have slowly moved upward.

Rates for 15-year, fixed-rate mortgages rose this week to 5.67 percent, up from 5.63 percent last week. Rates for one-year adjustable rate mortgages increased to 4.14 percent this week, a big jump compared with last week's average rate of 3.98 percent.

The recent rise in mortgage rates comes in anticipation that the Federal Reserve will raise a key short-term interest rate for the first time in four years on June 30.

"All eyes will be on the Fed for the next few months at least. How aggressive or how measured the coming rates hikes are will determine the future direction of both short- and long-term mortgage rates," said Frank Nothaft, Freddie Mac's chief economist.

David Lereah, chief economist at the National Association of Realtors, is predicting that 30-year mortgage rates will rise to 6.9 percent by the final quarter of this year, which would still be considered low by historical standards. He is forecasting sales of previously owned homes to set a new record this year and sales of new homes to finish close to a record high.

This time a year ago, rates on 30-year mortgages averaged 5.21 percent, rates for 15-year mortgages stood at 4.60 percent and rates on one-year ARMs averaged 3.54 percent.

The nationwide averages for mortgage rates do not include add-on fees known as points. Each loan type carried an average fee of 0.7 point this week.

The recent rise in mortgages is slowing refinancing activity. Refinancings accounted for just 32.6 percent of total mortgage loan applications filed last week, down from 34.3 percent in the previous week.