Mortgage rates escalate - May 4, 2000

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Mortgage rates escalate

May 4, 2000: 2:30 p.m. ET

Market reacts to Fed action fears by pushing 1-year rates to 9-year high

NEW YORK (CNNfn) - Mortgage rates jumped last week, according to a survey released Thursday by Freddie Mac.

The average rate on a 30-year fixed-rate mortgage was 8.28 percent for the week ending May 5, up from 8.13 percent a week earlier.

A year ago, the same mortgage was 7.02 percent.

The average for a 15-year fixed-rate mortgage was 7.94 percent, the highest it has been since the week ended Feb. 18, 2000, when it reached 8 percent.

A week earlier the rate was 7.79 percent, and twelve months ago the same loan averaged 6.61 percent.

A one-year adjustable rate mortgage (ARM) averaged 6.90 percent, up from the previous week's average of 6.77 percent and the highest since the week of Sept. 6, 1991, when it averaged 6.93 percent.

The same mortgage averaged 5.68 percent a year ago.

"A financial sector nervous about the Federal Reserve's likely actions pushed mortgage rates higher this week," said Robert Van Order, chief economist for Freddie Mac. "Fear of inflation finally making inroads into the economy coupled with the near certainty of another hike in short-term interest rates - and the possibility it may be a hefty hike - has driven the 1-year ARM to it's highest level in 9 years."

[Click here to see a breakdown of U.S. mortgage rates by region.]

Van Order said Friday's employment figures could have a crucial effect on what decision the Federal Reserve makes when it meets later in May.

Freddie Mac (FRE: Research, Estimates), or Federal Home Mortgage Corp., is a publicly traded company the government set up in 1970 to provide a flow of funds to mortgage lenders.

It buys mortgages from banks, bundles them, and then resells them as mortgage-backed securities. Its products and the products of other similar agencies have become increasingly popular as an alternative to government-backed bonds, particularly with international investors.

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