Mortgage Rates Pass the 6% Mark
The average rate on 30-year fixed-rate mortgages rose above 6% for the first time since March, and home buyers face the prospect of higher rates in the months ahead, according to a national survey released Thursday.
The steady increase in mortgage rates in recent months could, in the long run, cool down sizzling home sales and price appreciation, analysts say. However, in the short term, the rate surge could boost sales as buyers jump into the market to beat future rate increases.
The rate on a 30-year fixed mortgage averaged 6.03% this week, up from 5.98% last week, according to a nationwide survey by mortgage giant Freddie Mac. This week’s average rate was the highest since 6.04% in late March.
Adjustable-rate mortgages averaged 4.85% this week, the highest since May 2002, up from 4.77% a week ago and 4.01% a year ago.
After the average 30-year fixed rate fell to as low as 5.53% in early July, home loan rates have risen in tandem with higher yields on long-term U.S. Treasury bonds. The Treasury yields have been pushed up by the Federal Reserve’s credit-tightening campaign and by the threat of worsening inflation from continued high energy prices, analysts say.
This upward pressure on long-term bond rates is expected to continue as long as higher energy prices drive up overall inflation. That is likely to put more pressure on the Fed to keep boosting its benchmark short-term rate to tame inflation.
Further increases in fixed mortgage rates could hurt first-time home buyers as well as homeowners with adjustable-rate loans who hoped to refinance into fixed-rate mortgages.
Mortgage rates have been projected to rise gradually over the next year, with the 30-year fixed rate expected to hover around 6% through 2005 and reach 6.4% by 2006, said Freddie Mac chief economist Frank Nothaft.
A projected increase in economic growth next year “coupled with the specter of high energy costs will translate into higher long-term mortgage rates in the coming months,” Nothaft said.
Times staff writers Tom Petruno and Annette Haddad contributed to this report.
