Mortgage rate jump reverses declines

NEW YORK (CNNMoney.com) -- Mortgage rates gained substantially this week, nearly erasing the declines they've seen over the last three weeks, Freddie Mac reported Thursday.

The government-sponsored loan buyer said the average rate on a 30-year fixed-rate loan rose to 6.73 percent for the week ending July 12, from 6.63 percent the previous week.

Last year at this time, 30-year mortgage rates averaged 6.74 percent.

"A favorable employment report for June and robust consumer credit growth for May pushed long-term mortgage rates higher in the past week, nearly eliminating the declines made in rates over the previous three weeks," Frank Nothaft, Freddie Mac's (Charts, Fortune 500) chief economist, said in a statement. "In addition, consumer credit jumped by $12.9 billion in May, almost double market expectations."

Rising rates, among other factors, caused industry groups like the Mortgage Bankers Association (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.

Doug Duncan, chief economist for the MBA, has said he expects mortgage rates to top out near 7 percent by the end of the year. When rates go up, would-be home buyers face higher monthly mortgage payments, cutting into overall affordability.

In its report, Freddie Mac said that rates on 15-year fixed-rate loans averaged 6.39 percent in the latest week, up from 6.30 percent a week ago,

A year ago, the 15-year rate averaged 6.37 percent.

Five-year adjustable-rate mortgages (ARMs) averaged 6.35 percent this week, up from 6.29 percent last week. A year ago, the 5-year ARM averaged 6.33 percent.

One-year ARMs averaged 5.71 percent this week, unchanged from last week. At this time last year, they averaged 5.75 percent.