Editor’s note: This story has been corrected to note that mortgage rates hit record lows during the week ending Nov. 11.

Rates on most mortgages continued their year-end surge in the final week of 2010, with 30-year fixed-rate loans climbing to their highest level since May, Freddie Mac said in releasing the results of its Primary Mortgage Market Survey.

Rates on 30-year fixed-rate mortgages averaged 4.86 percent with an average 0.8 point for the week ending Dec. 30, up from 4.81 percent the week before, but still below the 5.14 percent recorded at the same point in 2009.

The 15-year fixed-rate mortgage averaged 4.2 percent with an average 0.8 point, up from 4.15 percent the week before but down from 4.54 percent a year ago.

Rates on 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 3.77 percent with an average 0.7 point, up from 3.75 percent the week before but down from 4.44 percent a year ago.

The 1-year Treasury-indexed ARM was the only mortgage tracked by Freddie Mac to see rates ease. The 1-year ARM averaged 3.26 percent wth an average 0.6 point, down from 3.4 percent the week before and 4.33 percent a year ago.

Rates on 30-year fixed-rate mortgages hit a record low of 4.17 percent during the week ending Nov. 11, and averaged 4.7 percent for the year as a whole.

That’s the lowest annual average since 1955, when secondary market yields on FHA mortgages were above 4.6 percent and the average price of a home was $22,000, Freddie Mac chief economist Frank Nothaft said in a statement.

Mortgage rates were held down in 2010 by a combination of government action and economic uncertainty.

When the year began, the Federal Reserve was winding down a $1.25 trillion program in which it purchased mortgage-backed securities (MBS) guaranteed by Fannie Mae and Freddie Mac to keep rates low.

After that program ended in March, investors continued to buy the mortgage-backed securities that fund most home lending, in part out of worries that the European debt crisis would spiral out of control.

Signs that the recovery is picking up steam means mortgage-backed securities have fallen out of favor with investors, pushing yields up.

The Federal Reserve’s latest attempt at "quantitative easing" — a plan to purchase up to $600 billion in Treasurys that’s been dubbed QE2 — was intended to keep a lid on long-term interest rates. But so far the plan hasn’t worked as intended, as expectations for growth and possibly inflation have kept rates on an upward trajectory.

In a Dec. 17 forecast, the Mortgage Bankers Association projected that rates on 30-year fixed-rate loans will average 5.3 percent in 2011, rising from an average of 5.2 percent during the first three months of the year to 5.5 percent during the fourth quarter.

MBA economists expect rates on 30-year fixed-rate mortgages to average 5.8 percent in 2012, climbing from an average of 5.5 percent during the first quarter to 6.1 percent during the final three months of the year.

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