U.S. mortgage rates up for second straight week: Freddie Mac

A house for sale has a ''Reduced Price'' sign in front of it in Dearborn, Michigan, March 27, 2009.

NEW YORK (Reuters) - U.S. mortgage rates rose for a second consecutive week as Treasury yields climbed, a move that does not bode well for the hard-hit U.S. housing market.

Interest rates on U.S. 30-year fixed-rate mortgages averaged 5.25 percent this week, up from last week's 5.20 percent, according to a survey released on Thursday by home funding company Freddie Mac.

The mortgage rate was also significantly higher than the record low of 4.78 percent set the week ending April 2. Freddie Mac started the Primary Mortgage Market Survey in 1971.

Matt Stadler, principal and chief risk officer at National Asset Direct in Dallas, Texas, said there is a significant supply and demand imbalance in the housing market.

"Interest rates are a critical component of the demand side," he said.

"Anything that increases the ability of potential borrowers to access affordable credit will improve the situation," he said.

Mortgage rates remained above 5 percent for a ninth straight week. Experts say mortgage rates at 5 percent and below are necessary to make a significant impact on home loan demand.

"The rate on mortgages greatly impacts the affordability of homes and pushes significant volumes of new buyers over the edge into a property when it remains low for a reasonable period of time," he said.

Treasury yields, which are linked to mortgage rates, have risen recently, with mortgage rates responding in kind.

"Bond yields rose slightly higher this week on market optimism that the economy may be stabilizing somewhat, and mortgage rates followed," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

The rise in rates is a negative for the U.S. housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions, and even rising in some regions.

Thirty-year mortgage rates had been on a downward trend for most of this year after the Federal Reserve unveiled its plan to buy mortgage-backed debt in late November. But the Fed met resistance in the bond market.

The U.S. government has embarked on an aggressive plan to bring mortgage rates down to levels that will spur demand and help the hard-hit housing market begin to recover.

The Fed has set a goal to buy up to $1.25 trillion of agency MBS, $300 billion of Treasuries and $200 billion of agency debt in 2009. The purchases are more than half-way completed and are part of efforts to lower borrowing costs.

The battered U.S. housing market, which has suffered the worst downturn since the Great Depression, is both the source and a major casualty of the credit crisis. A setback for the market could prolong a turnaround for the United States, the world's largest economy.

OTHER RATES RISE

Freddie Mac said the 15-year fixed-rate mortgage averaged 4.69 percent in the latest week, up from 4.68 percent the prior week.

One-year adjustable-rate mortgages, or ARMs, rose to an average of 4.80 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 4.75 percent, compared with 4.74 percent a week earlier.

A year ago, 30-year mortgage rates averaged 6.52 percent, 15-year mortgages were at 6.07 percent and the one-year ARM was at 5.27 percent. A year ago, the 5/1 ARM averaged 6.07 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, down from 0.7 percent the previous week. The one-year ARM fees and points were 0.5 percent, down from 0.6 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.

(Editing by Kenneth Barry)