Mortgage rates continued higher for the second consecutive week on markets’ belief that the current rate of inflation will force the Fed to raise its federal funds rate through August, according to surveys conducted by Freddie Mac and Bankrate.com.

In Freddie Mac’s survey, the 30-year fixed-rate mortgage climbed to an average 6.71 percent for the week ended today, up from last week’s average of 6.63 percent. The 30-year fixed has not been higher since May 31, 2002, when it averaged 6.76 percent.

The average for the 15-year fixed-rate mortgage rose to 6.36 percent this week, up from last week’s average of 6.25 percent. The 15-year fixed has not been higher since May 17, 2002, when it averaged 6.37 percent.

Points, which are fees charged by lenders for loan processing expressed as a percent of the loan, averaged 0.5 on the 30- and 15-year loans.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 6.32 percent this week, with an average 0.6 point, up from last week when it averaged 6.23 percent. The one-year Treasury-indexed adjustable-rate mortgage averaged 5.75 percent, with an average 0.8 point, also up from last week when it averaged 5.66 percent. The 1-year ARM has not been higher since Aug. 3, 2001, when it averaged 5.77 percent.

“Financial markets believe that the current rate of inflation is above the Fed’s comfort zone, which will lead to more rate hikes in the near future,” said Frank Nothaft, Freddie Mac vice president and chief economist. “A rate hike in June is thought to be a sure thing, and what was believed to be a vaguely possible hike in August is now considered to be highly likely; that change in market expectations caused mortgage rates to jump higher this week.”

In Bankrate.com’s survey, fixed mortgage rates continued to rise this week, with the average 30-year fixed-rate mortgage growing from 6.71 percent to 6.83 percent. The 30-year fixed-rate mortgages in this week’s survey had an average of 0.33 discount and origination points.

The average 15-year fixed-rate mortgage, popular for refinancing, rose to 6.45 percent, according to Bankrate.com. On larger loans, the average jumbo 30-year fixed rate moved upward to 7 percent from 6.88 percent. Adjustable-rate mortgages soared higher, with the average 5/1 adjustable-rate mortgage up to 6.49 percent, and the average one-year ARM climbing to 6 percent.

Bankrate.com reported that this week’s sharp rise marked the end of a watch ‘n’ wait period when mortgage markets seemed to be passing time until next week’s Federal Reserve meeting. The benchmark 30-year rate had remained bottled up between 6.67 percent and 6.73 percent from May 3 to June 14. That ended this week, when the mortgage market concluded that the Fed not only will raise short-term rates next week, but might boost again at its next scheduled meeting on Aug. 8.

Fixed mortgage rates are considerably higher than one year ago, Bankrate.com reported. This time last year, the average 30-year fixed mortgage rate was 5.66 percent, meaning that the monthly payment on a loan of $165,000 was $953.48. With the average 30-year fixed rate now 6.83 percent, the same loan originated today would carry a payment of $1,078.98. Fixed mortgage rates remain an attractive refinancing alternative for adjustable=rate borrowers facing sharp payment adjustments.

The following is a sampling of Bankrate.com’s average 30-year-mortgage interest rates this week in some U.S. metropolitan areas:

New York – 6.8 percent with 0.23 point

Los Angeles – 6.87 percent with 0.47 point

Chicago – 6.98 percent with 0.05 point

San Francisco – 6.93 percent with 0.24 point

Philadelphia – 6.7 percent with 0.4 point

Detroit – 6.87 percent with 0.04 point

Boston – 6.81 percent with 0.22 point

Houston – 6.81 percent with 0.56 point

Dallas – 6.84 percent with 0.48 point

Washington, D.C. – 6.68 percent with 0.63 point

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