US mortgage rates surge in latest week-Freddie Mac

NEW YORK, Sept 25 (Reuters) - Interest rates on U.S. 30-year fixed-rate mortgages rose by 0.31 percentage point in the latest week, the biggest weekly climb since July, according to a survey released on Thursday by home funding company Freddie Mac.

Interest rates on the 30-year fixed-rate mortgage averaged 6.09 percent for the week ending Sept. 25, up from the previous week's 5.78 percent, Freddie Mac said in its weekly Primary Mortgage Market Survey.

"Mortgage rates followed Treasury bond yields higher this week amid market uncertainty over the current state of the economy," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

The benchmark 10-year Treasury note yield plunged to its lowest level since 2003 last week at the height of investor fears about holding all but the safest government issued paper.

But its yield has rebounded by some 60 basis points on issuance worries as bond investors have started to weigh the massive slew of extra government debt supply that the planned $700 billion U.S. bailout will entail.

Treasury yields, which move inversely to price, are linked to mortgage rates.

It was the largest weekly rise since the week ended July 24 when interest rates on the 30-year fixed-rate mortgage averaged 6.63 percent, up 37 basis points from a week earlier.

Interest rates on the 30-year fixed-rate mortgage, however, are still below where they stood in the week ended Sept. 4, when the rate averaged 6.35 percent.

Compared with last Thursday, 10-year Treasury yields are up about 0.3 percentage points, and interest rates on the 30-year fixed-rate mortgage moved up about the same amount, Nothaft said.

Interest rates for 30-year fixed-rate mortgages are still more than 0.5 percentage point below this year's peak of 6.63 percent set the week of July 24, he said.

Interest rates on U.S. 30-year fixed-rate mortgages had plunged several weeks ago, driven by the U.S. government's rescue effort for mortgage finance companies Fannie Mae (FNM.P) and Freddie Mac (FRE.P).

The 15-year fixed-rate mortgage averaged 5.77 percent, up from 5.35 percent.

One-year adjustable rate mortgages, or ARMs rose in the week to an average of 5.16 percent from 5.03 percent last week.

Freddie Mac said the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaged 6.02 percent compared with 5.67 percent a week earlier.

A year ago, 30-year mortgage rates averaged 6.42 percent, 15-year mortgages 6.09 percent and the one-year ARM was at 5.60 percent. The 5/1 ARM averaged 6.15 percent.

Lenders charged an average of 0.7 percent in fees and points on 30-year mortgages, up from 0.6 percent the previous week.

Fees and points averaged 0.6 percent 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, unchanged from the previous week.

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. (Additional reporting by John Parry; editing by Gary Crosse)