Mortgage rates marched higher this week as markets held onto a slight belief that inflation may not yet be fully contained, 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 6.8 percent this week, up from last week’s average of 6.74 percent. The 15-year fixed-rate mortgage also gained from last week, rising from 6.37 percent to 6.41 percent.
Points, which are fees charged by lenders for loan processing expressed as a percent of the loan, averaged 0.5 on the 30-year and 0.4 on the 15-year loans.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 6.36 percent this week, with an average 0.5 point, up from last week when it averaged 6.33 percent. The one-year Treasury-indexed ARM averaged 5.8 percent, with an average 0.6 point, up from last week’s average of 5.75 percent.
“Financial markets were a bit jittery after core Consumer Price Index (CPI) figures for June were released that indicated inflation might still be a potential threat,” said Frank Nothaft, Freddie Mac vice president and chief economist. “If this were the case, the Fed would be more inclined to continue to raise rates this year. Mortgage rates reflected that thinking and rose accordingly.
“However, Fed Chief Bernanke, in his semi-annual speech to Congress, hinted that another rise in overnight lending rates might not be imminent and financial markets breathed a collective sigh of relief, which should be reflected in the results of next week’s survey.”
In Bankrate.com’s survey, mortgage rates inched higher on both fixed- and adjustable-rate loans compared to one week ago. The average 30-year fixed-rate mortgage rose to 6.89 percent from 6.87 percent last week, and these loans had an average of 0.3 discount and origination points.
The average 15-year fixed-rate mortgage, popular for refinancing, increased by a similar amount to 6.49 percent, according to Bankrate.com. On larger loans, the average jumbo 30-year fixed rate is now 7.05 percent. Adjustable-rate mortgages were no different, with the average 5/1 ARM inching up to 6.55 percent, and the average one-year ARM rising to 6.13 percent.
Mortgage rates spent much of the past week treading water, but that all changed once Fed Chairman Ben Bernanke appeared before the Senate Banking Committee Wednesday morning, Bankrate.com noted. Almost immediately, Bernanke’s words soothed investors concerned about the Fed raising interest rates too far. Yields on government securities started to fall, and mortgage rates declined right along with them. Treasury yields and mortgage rates dipped sharply between 10 a.m. and 11 a.m. Eastern time Wednesday as Bernanke was speaking, although Bankrate.com said its weekly survey was largely complete prior to rates declining.
Fixed mortgage rates are more than one full percentage point higher than one year ago. In July 2005, the average 30-year fixed mortgage rate was 5.78 percent, meaning that the monthly payment on a loan of $165,000 was $966. With the average 30-year fixed rate now 6.89 percent, the same loan originated today would carry a payment of $1,086. Despite recent increases, fixed mortgage rates remain an attractive refinancing alternative for adjustable-rate borrowers facing sharp payment adjustments, according to Bankrate.com.
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 – 6.84 percent with 0.22 point
Los Angeles – 6.91 percent with 0.51 point
Chicago – 7.02 percent with 0.03 point
San Francisco – 6.95 percent with 0.27 point
Philadelphia – 6.77 percent with 0.31 point
Detroit – 6.95 percent with 0.01 point
Boston – 6.88 percent with 0.06 point
Houston – 6.96 percent with 0.4 point
Dallas – 6.89 percent with 0.49 point
Washington, D.C. – 6.7 percent with 0.66 point