U.S. mortgage rates rise from record low: Freddie Mac

NEW YORK Thu May 7, 2009 11:45am EDT

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NEW YORK (Reuters) - U.S. mortgage rates rose in the latest week, rising from a record low matched during the previous week and countering government efforts to bring rates down to levels that will spur demand and help the hard-hit housing market begin to recover.

Interest rates on U.S. 30-year fixed-rate mortgages rose to 4.84 percent for the week ending May 7, up from the previous week's 4.78 percent, equaling the all-time low, according to a survey released on Thursday by home funding company Freddie Mac FRE.N FRE.P.

Mortgage rates initially fell to 4.78 percent the week of April 2, the lowest since Freddie Mac started surveying them in 1971.

"Mortgage rates rose slightly this week amid positive economic news that the economy may be approaching the bottom of the recession," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Thirty-year mortgage rates had mostly been on a downward trend since the Federal Reserve unveiled a plan to buy mortgage-backed debt in late November.

The Federal Reserve has set a goal to buy up to $1.25 trillion of agency mortgage-backed securities, $300 billion of Treasuries and $200 billion of agency debt in 2009. The purchases are part of efforts to lower borrowing costs.

Cameron Findlay, chief economist at LendingTree.com based in Charlotte, North Carolina, said the strategy has been making an impact.

"The Federal Reserve's strategy and tactics to drive markets one way or another are well known in advance, so they must gauge the market's perception of their actions in advance, not only their resulting actions," he said.

"Their actions to date have proven they can move the market in a desirable direction," he said.

The battered U.S. housing market, which is in the midst of its worst downturn since the Great Depression, is seen as both the source and a major casualty of the credit crisis. A recovery for the market could portend a turnaround for the United States economy, the world's largest.

Low interest rates on mortgages are pivotal for the U.S. housing market this spring, the peak home buying season.

With mortgage rates hovering near record lows and affordability at a record high, potential home buyers already have several good reasons to be house hunting.

But many potential buyers, who are unemployed or who fear they may lose their jobs, are disinterested in purchasing a home.

Low mortgage rates have and should continue to spur demand for home refinancing loans. Lower monthly payments provide a bit of relief to strapped consumers amid rising unemployment and a shrinking economy.

But the low rates have so far had little to no impact on demand for loans to purchase homes. The Fed, however, hopes lower interest rates on mortgages will change that.

OTHER RATES RISE

Freddie Mac said the 15-year fixed-rate mortgage averaged 4.51 percent in the latest week, up from 4.48 percent the prior week.

One-year adjustable-rate mortgages, or ARMs, rose to an average of 4.78 percent from 4.77 percent last week.

Freddie Mac said the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaged 4.90 percent, compared with 4.80 percent a week earlier.

A year ago, 30-year mortgage rates averaged 6.05 percent, 15-year mortgages were at 5.60 percent and the one-year ARM was at 5.29 percent. A year ago, the 5/1 ARM averaged 5.67 percent.

Lenders charged an average of 0.7 percent in fees and points on 30-year mortgages, unchanged from the previous week, while they charged an average 0.7 percent in fees and points on 15-year mortgages, unchanged from the previous week.

The 5/1 ARM fees and points were 0.6 percent, unchanged from the previous week. The one-year ARM fees and points were 0.6 percent, down from 0.7 percent the previous week.

Freddie Mac and its larger sibling, Fannie Mae, were placed under government conservatorship in early September.

Freddie Mac is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio.

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