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Mortgage rates reach 1-year highs
Fifth straight week of gains as 30-year hits 6.34%; 15-year at 5.66%, and 1-year ARM hits 3.80%.
August 7, 2003: 12:37 PM EDT

NEW YORK (CNN/Money) - Optimism about the strength of an economic recovery pushed the 30-year mortgage rate to a one-year high, making the one-year adjustable rate mortgage an attractive option, according to a mortgage economist.

The 30-year mortgage rate jumped to 6.34 percent in the week ending August 8, from 6.14 percent a week earlier, with an average of 0.7 of a point payable up front, mortgage lender Freddie Mac reported Thursday. This week's 6.34 percent is the highest level since Aug. 2, 2002, when the 30-year stood at 6.43 percent.

The 15-year fixed-rate mortgage jumped to 5.66 percent, with 0.7 of a point up front, up from 5.44 percent last week, but still below the 5.69 percent level of a year ago. The 15-year mortgage rate is at the highest level since Oct. 25, 2002, when it hit 5.70 percent.

And the rate on one-year adjustable-rate mortgages (ARMs), loosely indexed to the 10-year Treasury note, rose to 3.80 percent, with 0.7 point up front, from 3.68 percent last week. At the same time last year, the one-year ARM averaged 4.37 percent.

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This is the highest level for the one-year ARM since April 4, 2003.

"Signs that the economy is finally improving has generated upward pressure on fixed-rate mortgage rates over these past few weeks," said Frank Nothaft, Freddie Mac's chief economist. "Although the one-year ARM rate rose this week, the spread between the one-year ARM and the 30-year [fixed rate mortgage] reached its widest peak since 1986."

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CNNfn's Lisa Leiter takes a closer look at the increasing concern over rising mortgage rates.

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Freddie Mac's average mortgage rates are based on a survey of 125 lenders nationwide. The rates include those on mortgages accepted by borrowers with good credit ratings who place a 20 percent down payment on their homes, according to Freddie Mac. The total amount of each mortgage considered for the survey doesn't exceed a $322,700 limit.

Freddie Mac (FRE: down $0.34 to $49.10, Research, Estimates), or Federal Home Loan Mortgage Corp., is a publicly traded company the government established 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 entities, have become increasingly popular as an alternative to government-backed bonds, particularly with international investors.  Top of page

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