Mortgage rates edged up this week as investors shook off worries about the European debt crisis and remained optimistic about the U.S. economy and prospects for growth.

Rates on 30-year fixed-rate mortgages averaged 3.57 percent with an average 0.8 point for the week ending March 28, up from 3.54 percent last week but down from 3.99 percent a year ago, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey. Rates on 30-year fixed-rate loans hit a low in Freddie Mac records dating to 1971 of 3.31 percent during the week ending Nov. 21, 2012.

For 15-year fixed-rate mortgages, rates averaged 2.76 percent with an average 0.7 point, up from 2.72 percent last last week but down from 3.23 percent a year ago. Rates on 15-year fixed-rate loans hit a low in Freddie Mac records dating to 1991 of 2.63 percent during the week ending Nov. 21, 2012.

For five-year Treasury-indexed hybrid-rate mortgage (ARM) loans, rates averaged 2.68 percent with an average 0.6 point, up from 2.61 percent last week and down from 2.90 percent a year before. The average rate for last week tied an all-time low in Freddie Mac records dating to 2005 last seen during the week ending Feb. 28. 

Rates on one-year Treasury-indexed ARM loans averaged 2.62 percent with an average 0.3 point, virtually unchanged from last week, but down from 2.78 percent a year ago. Rates on one-year ARM loans hit a low in records dating to 1984 of 2.52 percent during the week ending Dec. 20, 2012.

Looking back a week, applications for purchase loans rose a seasonally adjusted 7 percent for the week ending March 22 from the previous week, according to a separate survey by the Mortgage Bankers Association. Demand for purchase loans was up 10 percent from a year ago.

News that home prices posted strong gains in January helped drive the Dow Jones Industrial Average to a record high Tuesday and push the S&P 500 Index to just two points short of its own all-time high.

When investors are confident about the economy, they have more appetite for risky investments like stocks and less appetite for conservative investments like mortgage-backed securities (MBS) that fund most U.S. mortgage loans. Reduced demand for MBS causes their prices to fall, pushing up yields and mortgage rates.

Strong economic growth also fuels speculation that the Federal Reserve will scale back the pace of its MBS purchases. The Fed is currently buying $40 billion in MBS and $45 billion in long-term Treasurys a month to keep rates low, encourage borrowing, and stimulate growth.

In a forecast issued today, economists at Fannie Mae said they expect rates on 30-year fixed-rate mortgages to average 4 percent in the final three months of this year, and continue climbing to an average of 4.5 percent during the fourth quarter of 2014. That’s a slightly gentler path than Fannie Mae was projecting in February.

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