Mortgage rates: biggest spike in 4 years
Rate on 30-year fixed mortgage climbed to to 6.74% in past week, highest level since July 2006.
NEW YORK (CNNMoney.com) -- Mortgage rates made their largest upward movement in nearly 4 years, and the 30-year fixed-rate reached its highest level since July 2006, Freddie Mac said Thursday.
The average rate on 30-year fixed-rate loans climbed to 6.74 percent for the week ending June 14, from 6.53 percent the previous week. That marked the biggest one-week increase since July 2003.
Last year at this time, 30-year mortgage rates averaged 6.63 percent. The rate is the highest since July 20, 2006, when it averaged 6.80 percent.
The 30-year rate stood at 6.15 percent on May 10th, just before it turned sharply up.
Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), expects mortgage rates to top out near 7 percent by the end of the year.
Rising rates, among other factors, have caused the MBA and the National Association of Realtors to push back their forecasts for a home price recovery. Both groups are now looking to early 2008, compared with a previous outlook for mid-2007.
Home prices and mortgage rates are closely connected. If rates go up, would-be home buyers face higher monthly mortgage payments, cutting into overall affordability.
The 0.59-percentage point increase since May 10 represents a jump of $115 a month on a $300,000 loan.
"Mortgage rates moved sharply upward this week, with rates on 30-year fixed-rate mortgages jumping more than 20 basis points, the largest upward movement in over three years," said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement. He said that inflation pressures and economic strength have led to rising yields on Treasury securities and mortgages.
"Higher mortgage rates may weigh on the housing market's gradual recovery. While demand appears to have stabilized, inventories of new homes remain high, putting downward pressure on construction and home prices," he added.
Five-year adjustable-rate mortgages rose to 6.37 percent from 6.24 percent last week. The five-year ARM averaged 6.23 percent a year ago.
One-year ARMs averaged 5.75 percent, up from 5.65 percent last week and 5.66 percent a year ago.
Mortgage rates, of course, are only one third of the affordability equation that plays out in the housing market. There's also home prices themselves and household incomes, both of which have been positive lately for buyers, according to DeKaser.