Rates on 30-year fixed-rate mortgages broke through the 5 percent mark this week for the first time in three weeks, Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage averaged 5.05 percent with an average 0.7 point for the week ending Feb. 25, up from 4.93 percent last week but down from 5.07 percent a year ago.

The 15-year fixed-rate mortgage averaged 4.4 percent with an average 0.7 point, up from 4.33 percent last week but down from 4.68 percent a year ago.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.16 percent with an average 0.6 point, up from 4.12 percnet last week but down from 5.06 percent a year ago.

Freddie Mac Chief Economist Frank Nothaft said rates for 30-year fixed mortgages followed long-term bond yields higher amid a mixed set of economic data reports.

The January producer price index jumped well above the market consensus, but the consumer price index remained subdued and Conference Board’s consumer confidence declined to the lowest level since April 2009, Nothaft said.

The Federal Reserve’s ongoing purchases of mortgage-backed securities helped push rates on 30-year fixed-rate loans down to  a record low of 4.71 percent in December, but mortgage rates are expected to rise when the Fed completes the $1.25 trillion program next month.

In testimony before the House Financial Services Committee Wednesday, Federal Reserve Chairman Ben Bernanke confirmed that the Fed plans to wind the MBS program down.

But the Fed expects to keep its target for a key short-term interest rates, the federal funds overnight rate, "exceptionally low" for "an extended period," Bernanke said. The target for the federal funds rate has been at zero to 0.25 percent since December 2008.

Although the Fed does not have as direct a role in determining mortgage rates, simply holding the MBS the Fed has purchased to date will help keep mortgage rates down, Bernanke said in a Q-and-A session.

In a forecast issued Monday, economists at the Mortgage Bankers Association said they expect  rates on 30-year fixed-rate mortgages will rise from an average of 4.9 percent during the final quarter of 2009 to 6 percent in the final quarter of 2010, primarily as a result of the Fed ending its purchas program.

The MBA expects rates on 30-year fixed-rate loans to steadily rise to 6.3 percent in the last quarter of 2011 and hit 6.6 percent during the last three months of 2012.

Yields on MBS will have to increase to get private investors back into the market once the Fed stops its purchases, MBA economists said in commentary accompanying their forcast.

The MBA expects that rising mortgage rates will cool demand for refinancings, which are expected to fall by 60 percent from 2009, to $529 billion. The MBA expects purchase loan originations will essentially remain flat in 2010 at $745 billion, as home prices stabilize and sales increase.


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