U.S. mortgage rates at highest level since December

By Julie Haviv

NEW YORK (Reuters) - U.S. mortgage rates jumped to their highest levels since December in the latest week, complicating government efforts to bring mortgage 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 5.25 percent for the week ending February 5, up from the previous week's 5.10 percent, according to a survey released on Thursday by home funding company Freddie Mac.

It was the highest rate for the 30-year fixed-rate mortgage since the week ended December 11 when it reached 5.47 percent.

The battered U.S. housing market, which is in the midst of its 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.

"Interest rates for fixed-rate mortgages rose this week amid economic reports that were somewhat better than consensus forecasts had anticipated," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Three weeks earlier, mortgage rates were 4.96 percent, which was the lowest since Freddie Mac started the Primary Mortgage Market Survey in 1971.

The recent rise in mortgage rates can be tied to U.S. Treasury yields, which are linked to mortgage rates. Treasury yields have risen sharply on fears over surging debt issuance to fund a ballooning budget gap and an array of government rescue programs.

Prior to the recent rise, 30-year mortgage rates had mostly been on a downward trend since the Federal Reserve unveiled a plan in late November to buy as much as $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. The program also entails buying up to $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

Low mortgage rates in recent weeks have spurred a surge in demand for home refinancing loans, and refinancing to lower monthly payments should provide a bit of relief to strapped consumers amid rising unemployment and a shrinking economy.

Low mortgage rates, however, have had only a marginal impact on demand for loans to purchase homes, igniting calls to bring rates down to much lower levels.

OTHER INTEREST RATES MIXED

The 15-year fixed-rate mortgage averaged 4.92 percent in the latest week, up from 4.80 percent in the prior week. One-year adjustable-rate mortgages, or ARMs, rose to an average of 4.92 percent from 4.90 percent last week.

Freddie Mac said the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaged 5.26 percent, compared with 5.27 percent a week earlier.

A year ago, 30-year mortgage rates averaged 5.67 percent, 15-year mortgages were at 5.15 percent and the one-year ARM was at 5.03 percent. A year ago, the 5/1 ARM averaged 5.21 percent.

Lenders charged an average of 0.8 percent in fees and points on 30-year mortgages, up from 0.7 percent the previous week, while they charged an average 0.8 percent in fees and points on 15-year mortgages, up from 0.7 percent the previous week.