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Mortgage rate hits fresh 4-year high Expectation of more interest rate hikes by the Federal Reserve contributes to increase in home loan rates. NEW YORK (CNNMoney.com) -- Mortgage rates jumped this week to the highest level in four years, Freddie Mac said Thursday. The average rate on the 30-year fixed-rate mortgage was 6.78 percent for the week ending June 29, up from 6.71 percent the week before. That's the highest level since late May 2002 when the 30-year loan rate stood at 6.81 percent.
A year ago, the 30-year mortgage rate averaged 5.62 percent. "Financial markets continue to expect more rate hikes by the Fed over the next six months, which has added upward pressure on mortgage rates," said Frank Nothaft, Freddie Mac vice president and chief economist. Rising rates have contributed to a slowing in in housing market after a decade-long boom. "With higher interest rates, the housing market has begun a gradual and orderly reversion towards historical norms," said Nothaft. "For instance, new construction, home sales and house price appreciation have all been slowing over the past few months." Further Fed rate hikes could help push mortgage rates higher still, though home loan rates are more closely tied to the Treasury bond market than to the Fed's short-term rate target. Freddie Mac also said the average rate on 15-year fixed-rate mortgages rose to 6.43 percent from 6.36 percent the previous week. A year ago, that loan averaged 5.20 percent. Five-year adjustable-rate mortgages averaged 6.39 percent, up 0.07 percentage points from last week. The five-year ARM averaged 5.19 percent a year ago. The average one-year adjustable-rate mortgage (ARM) jumped to 5.82 percent from 5.75 percent. At this time last year, the one-year loan averaged 4.33 percent. For homeowners using adjustable rate mortgages, a rise in interest rates can mean ballooning payments. The Mortgage Bankers Association estimates that some $330 billion worth of ARMs will adjust in 2006 and $1 trillion worth will reset by the end of 2007. With a $200,000 loan adjusting upward from 4 percent to 6 percent, the monthly bill would increase to about $1,200, from $955. ------------------------------------------ |
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