Mortgage Rates Leap on Fears Fed Will Soon Raise Interest Rates

Mortgage rates jumped to the highest levels in nearly 17 months this week on worries that the Federal Reserve Board will raise interest rates soon, the Federal Home Loan Mortgage Corp. said Thursday.

Thirty-year fixed-rate mortgages averaged 8.42% in the week ending July 12, up from 8.14% the previous week. The rate was the highest since the week ended March 10, 1995, when it was 8.62%.

Fifteen-year mortgages jumped to 7.93% from 7.67%. The rate was the highest since 7.99% in the week ended April 7, 1995.

One-year adjustable mortgages also rose, climbing to 6.01% from 5.94%. Freddie Mac said the last time the loan rate was higher was the week of May 26, 1995, when it stood at 6.06%.

A year ago, the 30-year loan averaged 7.41%, the 15-year was 6.89% and the adjustable loan was 5.80%, Freddie Mac said.

Interest rates on bonds and mortgages rose last week after the government said the U.S. unemployment rate dipped to a six-year low of 5.3% in June.

“Reaction to employment figures just released, along with the fear inflation will come with a stronger economy and uncertainty as to what the Fed will do with interest rates, caused the bond market to fall and interest rates to rise,” Robert Van Order, Freddie Mac chief economist, said.