U.S. mortgage rates surge to highest level since December

NEW YORK (Reuters) - U.S. mortgage rates surged to their highest in almost six months in the latest week, despite government efforts to keep rates at low levels that will help the hard-hit housing market begin to recover.

A sign points to a home for sale in a file photo. REUTERS/Richard Clement

Interest rates on U.S. 30-year fixed-rate mortgages soared to 5.29 percent for the week ending June 4, up from 4.91 percent in the previous week, according to a survey released on Thursday by home funding company Freddie Mac.

The higher rates reflected an increase in yields on U.S. government bonds, which act as a benchmark for the mortgage market.

“Any additional rate increases will significantly hurt the home purchase and refinance markets, which will really hurt the economic recovery,” said Alan Rosenbaum, president of Guardhill Financial, a New York City-based mortgage banker and brokerage company.

The last time rates exceeded current levels was the week ended December 11, 2008, when the 30-year rate was at 5.47 percent. The latest week marked the biggest jump since a 0.42 percentage point rise in the week ended October 30, 2008, when rates hit 6.46 percent.

Just five weeks ago, the 30-year fixed-rate mortgage matched the record low of 4.78 percent that was set the week ended April 2. Freddie Mac started its Primary Mortgage Market Survey in 1971.

“Thirty-year fixed-rate mortgage rates caught up to the recent rise in long-term bond yields this week to reach a 25-week high, ” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Guardhill Financial’s Rosenbaum said consumers should act quickly in the current market conditions.

“We are recommending that borrowers who were sitting on the fence waiting for lower rates to take notice that rates move up very quickly and that they should lock in savings even if it’s not as great as it once was,” he said.

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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 as part of efforts to bring mortgage rates down to levels that will spur demand.

Demand for home refinancing loans, which had been spurred by low mortgage rates, has dropped recently. Even lower rates, however, had been having limited impact on demand for loans to purchase homes.

Spring is traditionally the peak home buying season.

The Fed 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 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.


Freddie Mac said the 15-year fixed-rate mortgage averaged 4.79 percent in the latest week, up from 4.53 percent the prior week.

One-year adjustable-rate mortgages, or ARMs, rose to an average of 4.81 percent from 4.69 percent last week. Freddie Mac said the “5/1” ARM, set at a fixed rate for five years and adjustable each following year, averaged 4.85 percent, compared with 4.82 percent a week earlier.

A year ago, 30-year mortgage rates averaged 6.09 percent, 15-year mortgages were at 5.65 percent and the one-year ARM was at 5.06 percent. A year ago, the 5/1 ARM averaged 5.51 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, unchanged from the previous week.

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

Both companies buy mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio.

Editing by Leslie Adler