Mortgage rates move sharply higher

NEW YORK (CNNMoney.com) -- Mortgage rates jumped this week on upbeat consumer sentiment and speculation that the Federal Reserve would not cut interest rates anytime soon, Freddie Mac said Thursday.

The average rate on 30-year fixed-rate loans climbed to 6.37 percent for the week ending May 24, up from 6.21 the previous week, the mortgage finance firm said. Last year at this time, 30-year mortgage rates averaged 6.62 percent.

"Stronger than expected consumer confidence and recent comments from members of the Federal Reserve raised some inflation concerns in the market, causing it to lower expectations of a Fed rate cut this year. This helped push mortgage rates higher this week," Frank Nothaft, Freddie Mac's vice president and chief economist, said in a statement.

"We expect a gradual rise in mortgage rates over the remainder of the year with sales slipping further in the second half of the year. A gradual recovery returns toward the end of 2007 with modest increases in sales and construction during 2008."

Earlier this month, the Federal Reserve held interest rates steady for the seventh straight time but indicated in its statement it was concerned about slower economic growth as well as inflation, suggesting that the central bank will not soon cut interest rates.

The recent mortgage rate survey comes just as the government reported a surprising jump in new home sales in April, driven by a big drop in prices.

The rate on 15-year loans averaged 6.06 percent, up from 5.92 the previous week, Freddie Mac (down $1.51 to $66.38, Charts, Fortune 500) said. A year ago, the 15-year rate averaged 6.23 percent.

Five-year adjustable-rate mortgages rose to 6.02 percent from 5.92 percent last week. The five-year ARM averaged 6.21 percent a year ago.

The average one-year adjustable-rate mortgage averaged 5.64 percent, up from 5.48 the previous week. At this time last year, the loan averaged 5.61 percent.