Fixed-rate mortgages more expensive this week

Long-term mortgage rates continued higher this week on fears that the Fed’s recent move to make borrowing money more affordable would tempt sellers of Treasury bonds to raise their prices, in turn stimulating inflation, according to surveys conducted by Freddie Mac and Bankrate.com.

A popular misconception is that fixed mortgage rates take their cue from the actions of the Federal Open Market Committee, Bankrate.com noted. The past week is evidence that it rarely works that way. After the Fed cut short-term interest rates by a larger-than-expected half percentage point on Sept. 18, concerns about inflation began to percolate. Since inflation is the worst enemy of long-term bond investors, yields on 10-year government bonds moved higher, pushing mortgage rates — which are closely related to those yields — higher as well.

In Freddie Mac’s survey, the 30-year fixed-rate mortgage climbed to an average 6.42 percent from 6.34 percent a week ago, and the average 15-year fixed rate jumped to 6.09 percent from 5.98 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 on the 30- and 15-year loans.

Adjustable-rate mortgages (ARMs), on the other hand, were lower this week, as the five-year Treasury-indexed hybrid ARM dipped to an average 6.15 percent from 6.21 percent a week ago, while the rate on one-year Treasury-indexed ARMs sank to 5.6 percent from 5.65 percent. Points on the five-year and one-year loans averaged 0.5 and 0.6, respectively.

“Consistent with the direction of 10-year Treasury securities, average rates on 30-year fixed-rate mortgages drifted up in the past week to levels close to those at the beginning of the month,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

“Also tracking short-term Treasury notes, average rates on 1-year adjustable-rate mortgages dropped by 5-hundredth of a percent,” Nothaft said. “Though it is the fourth consecutive week rates on ARMs have declined, the share of mortgage applications for ARMs has been trending down, and last week reached its lowest level since March 2003, according to the Mortgage Bankers Association.”

In Bankrate.com’s survey, fixed mortgage rates increased for the second consecutive week, with the average conforming 30-year fixed mortgage rate rising to 6.49 percent. Discount and origination points on these loans averaged 0.37.

The average 15-year fixed-rate mortgage popular for refinancing increased by a similar amount to 6.16 percent, Bankrate.com reported, while the average jumbo 30-year fixed rate nosed higher to 7.31 percent. Adjustable mortgage rates were mostly lower, with the average one-year ARM slipping to 6.21 percent and the average 5/1 ARM sliding to 6.35 percent.

Bankrate.com noted that the inflation focus of today could quickly give way to economic worries, however, should disappointing data emerge. In all likelihood, this would pull mortgage rates lower. However, Bankrate.com said, the Fed remains coy about plans for the next meeting Oct. 30-31.

Compared to two months ago, fixed mortgage rates today are considerably lower, Bankrate.com reported. In July, the average 30-year fixed mortgage rate was 6.75 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,297. Now that the average conforming 30-year fixed rate is 6.49 percent, the same $200,000 loan carries a monthly payment of $1,263.

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 – 6.52 percent with 0.22 point

Los Angeles – 6.57 percent with 0.64 point

Chicago – 6.43 percent with 0.2 point

San Francisco – 6.48 percent with 0.68 point

Philadelphia – 6.57 percent with 0.17 point

Detroit – 6.47 percent with 0.08 point

Boston – 6.58 percent with 0.08 point

Houston – 6.46 percent with 0.65 point

Dallas – 6.41 percent with 0.5 point

Washington, D.C. – 6.41 percent with 0.51 point