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Mortgages: 30-year fixed rate has jumped a point since early May

Credit RatingsFinanceBusinessMortgagesBen BernankeKB HomeLennar Corp.

Residential mortgage rates aren't just up from the bottom -- they have zoomed a full percentage point above recent record lows, reaching the mid-4% range.

The average rate for a 30-year fixed-rate home loan hit 4.63% on Monday, according to HSH Associates, up from the 4.33% that HSH recorded Friday and a record average low of 3.44% for the week that ended Dec. 14.

The rocketing rates are choking off a boom in home refinances that hit high gear in September 2011, when the 30-year fixed rate dropped below 4% for the first time on record.

Although the rates remain exceedingly low by historic standards, the increase adds to payments, pricing marginal borrowers out of the market for homes they want to buy.

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The monthly payment on a 30-year fixed-rate mortgage for $300,000 is $1,347 at 3.5% but $1,520 at 4.5% -- more than $2,000 more per year. Should the 30-year rate rise to its historic norm of about 6%, the monthly payment would increase to $1,799, adding more than $5,400 to the annual financing cost.

Mortgage rates also have contributed to a recent sell-off in homebuilder stocks. Shares of Los Angeles' KB Home, which closed as high as $24.82 during the first half of May, closed Monday at $19.25 -- down 22% from that May price. Lennar Corp. closed Monday at $34.99, 20% off its high in May; and Toll Brothers Inc.  closed Monday at $31.85, 15% below its recent high of $37.60.  

Investors have been demanding higher interest rates since last week, when Federal Reserve Chairman Ben Bernanke said the Fed could begin tapering off its massive purchases of Treasury bonds and mortgage securities later this year.

The purchases, which stimulate the economy by keeping rates low, could end by the middle of next year, Bernanke said, rattling markets that also are skittish about a credit crunch in China, the world's second-biggest economy.

The yield on the 10-year Treasury note, generally a benchmark for fixed mortgage rates, rose for the sixth straight trading session Monday to close at 2.55%. It was 1.66% on May 2.

It’s difficult to tell whether the jump in rates reflects a new reality or simply an increase in volatility caused by confusion regarding the Fed’s plans, the Mortgage Bankers Assn. said in a financial commentary Friday.

“Regardless, refinance application volume, which had already dropped roughly 40% over the month, is likely to fall further,” the trade group said.

HSH is among the more prominent trackers of mortgage rates, each with a different methodology. Another survey, from Bankrate.com, bottomed out at 3.5% last December and fell nearly that low again May 1 at 3.52%.

“If we did the survey today, I’d say we’d be up close to 100 basis points,” meaning a full percentage point above the record low, Bankrate senior financial analyst Greg McBride said Thursday. That would leave the rate “around 4.5% on 30-year fixed,” he said.

The most widely followed survey of mortgage rates, from the giant home finance firm Freddie Mac, is released each Thursday. It bottomed out at a reading of 3.31% on two occasions last fall. The latest Freddie survey, taken early last week before Bernanke's remarks, showed rates pausing in their upward spiral, falling to 3.93% from 3.98% a week earlier. 

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Credit RatingsFinanceBusinessMortgagesBen BernankeKB HomeLennar Corp.
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