Mortgage rates increased for the third consecutive week as markets expect the Fed to continue raising its key interest rate to keep inflation in check, according to surveys conducted by Freddie Mac and Bankrate.com.
In Freddie Mac’s survey, the 30-year fixed-rate mortgage rose to an average 6.78 percent for the week ended today, up from last week’s average of 6.71 percent. The 30-year fixed has not been higher since May 24, 2002, when it averaged 6.81 percent.
The average for the 15-year fixed-rate mortgage climbed to 6.43 percent this week, up from last week’s average of 6.36 percent. The 15-year fixed has not been higher since April 12, 2002, when it averaged 6.49 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 (ARM) averaged 6.39 percent this week, with an average 0.5 point, up from last week when it averaged 6.32 percent. This is the highest the 5-year ARM has been since Freddie Mac started tracking it on Jan. 6, 2005.
One-year Treasury-indexed ARMs averaged 5.82 percent this week, with an average 0.8 point, also up from last week when it averaged 5.75 percent. The 1-year ARM has not been higher since the week ended June 8, 2001, when it averaged 5.85 percent.
“Financial markets continue to expect more rate hikes by the Fed over the next six months, which has added upward pressure on mortgage rates,” said Frank Nothaft, Freddie Mac vice president and chief economist. “With higher interest rates, the housing market has begun a gradual and orderly reversion towards historical norms. For instance, new construction, home sales and house-price appreciation have all been slowing over the past few months.”
In Bankrate.com’s survey, fixed mortgage rates increased for the third consecutive week as higher interest-rate expectations take hold. The average 30-year fixed rate mortgage jumped from 6.83 percent to 6.93 percent, the highest since April 17, 2002, according to Bankrate.com’s weekly national survey of large lenders. The 30-year fixed-rate mortgages in this week’s survey had an average of 0.34 discount and origination points.
The average 15-year fixed-rate mortgage, popular for refinancing, rose to 6.57 percent, Bankrate.com reported. On larger loans, the average jumbo 30-year fixed rate has cleared the 7 percent threshold by a healthy margin, climbing to 7.11 percent. Adjustable-rate mortgages were also on the move, with the average 5/1 adjustable-rate mortgage rocketing to 6.59 percent, and the average one-year ARM increasing from 6 percent to 6.09 percent.
Mortgage rates were largely unchanged from late April to mid-June, according to Bankrate.com, but the past three weeks have seen fixed mortgage rates rise nearly one-quarter percentage point. Typically, interest-rate moves by the Federal Open Market Committee don’t have a direct impact on fixed mortgage rates, and that has been the case for much of the past two years. But in recent weeks, fixed mortgage rates have climbed as bond investors come to grips with accelerating inflation and the prospect that the Fed will continue to raise interest rates. Mortgage rates are closely related to yields on long-term government bonds. With the yield on 10-year Treasury notes, the benchmark for fixed mortgage rates, roughly equal to what the fed funds rate will be following the Fed’s meeting, further rate hikes may mean more of the same for mortgage rates.
Bankrate.com noted that fixed mortgage rates have moved up considerably in the first half of this year. As 2005 came to a close, the average 30-year fixed mortgage rate was 6.28 percent, meaning that the monthly payment on a loan of $165,000 was $1,019. With the average 30-year fixed rate now 6.93 percent, the same loan originated today would carry a payment of $1,090. Despite recent increases, 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 – 6.88 percent with 0.24 point
Los Angeles – 6.96 percent with 0.53 point
Chicago – 7.07 percent with 0.06 point
San Francisco – 6.98 percent with 0.34 point
Philadelphia – 6.83 percent with 0.38 point
Detroit – 7 percent with 0.03 point
Boston – 6.91 percent with 0.15 point
Houston – 6.98 percent with 0.43 point
Dallas – 6.93 percent with 0.52 point
Washington, D.C. – 6.73 percent with 0.74 point