Mortgages climb to 6.37%, highest since September 2003
|•||Hawai'i Real Estate Report|
By Martin Crutsinger
By Martin Crutsinger
WASHINGTON — Rates on 30-year mortgages jumped to the highest level in 2 1/2 years this week, driven higher by inflation worries in financial markets.
Mortgage giant Freddie Mac reported yesterday that rates on 30-year, fixed-rate mortgages averaged 6.37 percent this week, according to its weekly survey.
That was up sharply from a nationwide average of 6.24 percent last week and left 30-year rates at the highest level since they averaged 6.44 percent the week of Sept. 5, 2003.
"Stronger than expected gains in the manufacturing and service industries — coupled with higher labor costs — ignited inflation concerns, which led to the rise in mortgage rates this week," said Frank Nothaft, chief economist at Freddie Mac.
He said investors have begun to worry that the Federal Reserve, which has been raising interest rates to combat inflation, may boost rates three more times this year.
The rising rates have begun to cool the sizzling housing market with sales of both new and existing homes posting bigger-than-expected declines in January.
Nothaft said the housing sector, which posted record sales levels for five straight years, was shifting to a slower pace, but he predicted the decline would not be severe enough to disrupt the overall economy like the stock market slowdown did in 2000.
"We see no signs of a bursting bubble, but rather a return to a more normal pace of activity," he said.
Some economists believe that 30-year mortgage rates could rise as high as 7 percent by the end of the year.
The Freddie Mac survey found sharp increases for all types of mortgages this week.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a home mortgage, averaged 6 percent. That was up from 5.89 percent last week and the highest level for 15-year mortgages since they averaged 6.03 percent the week of July 5, 2002.
One-year adjustable rate mortgages rose to 5.45 percent. That was up from 5.34 percent last week and the highest level for one-year ARMs since they averaged 5.58 percent the week of Sept. 21, 2001.
Rates on five-year hybrid adjustable rate mortgages rose to 6.03 percent this week, up from 5.97 percent last week. It was the first time this mortgage has been above 6 percent since Freddie Mac began tracking it at the beginning of last year.
The mortgages rates do not include add-on fees known as points. The 30-year and 15-year mortgages had a nationwide average fee of 0.6 points this week. The one-year adjustable rate mortgage carried a nationwide average fee of 0.8 points and the five-year ARM had a 0.7 point average fee.
A year ago, 30-year mortgages averaged 5.85 percent, 15-year mortgages stood at 5.38 percent, one-year adjustable-rate mortgages were at 4.24 percent and five-year hybrid adjustable rate mortgages averaged 5.22 percent.