Fixed-Rate Mortgages Rise, 30-Year Fixed Above 5%

Fixed-Rate Mortgages Rise, 30-Year Fixed Above 5%: "

Mortgage rates climbed for the first time in three weeks, increasing borrowing costs as new home sales slumped to the lowest level on record, according to Freddie Mac’s weekly survey of conforming mortgage rates.

Mortgage rates are widely seen to be on an upward trajectory this year. Rising mortgage rates do not bode well for the housing market, which remains highly vulnerable.

Rates on the 30-year fixed-rate mortgage averaged 5.05% for the week ending February 25, 2010, up from 4.93% last week, and 5.07% a year ago.

15-year fixed-rate mortgage averaged 4.40%, up from 4.33% last week, and 4.68% a year ago.

5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) averaged 4.16%, up from 4.12% last week; they averaged 5.06% a year ago.

1-year Treasury-indexed adjustable-rate mortgages (ARM) averaged 4.15%, down from 4.23% last week, and 4.81% a year ago.

To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point and the adjustable-rate mortgages required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

“Interest rates for 30-year fixed mortgages followed long-term bond yields higher and rose above 5% this week amid a mixed set of economic data reports” said Frank Nothaft, Freddie Mac vice president and chief economist.

Mortgage rates are linked to yields on Treasuries and mortgage-backed securities.

“For instance, the January producer price index jumped well above the market consensus, but the consumer price index remained subdued and consumer confidence declined to the lowest level since April 2009, according to the Conference Board.” Nothaft said.

Mortgage rates may rise further when the Federal Reserve ends its’ program to purchase as much as $1.25 trillion in mortgage-backed securities next month. The mortgage purchase program is credited with helping reduce mortgage rates.

Lower mortgage rates and the home buyer tax credits weren’t enough to boost new home sales in January 2010. Sales of new homes in the fell to the lowest level on record, slumping 11% to an annual pace of 309,000 units, the Commerce Department reported.

Median sales price declined 2.4% to $203,500 and the supply of unsold homes increased to 9.1 months worth at the current sales rate.

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