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Freddie Mac: 30-year mortgage rate jumps to 4.23% from 4.12% last week

Mortgage rates
Homes under construction in Irvine on Aug. 19.
(Mark Boster / Los Angeles Times)

Mortgage rates rose this week at the fastest pace of the year, with Freddie Mac’s survey showing lenders were offering 30-year fixed-rate loans at an average of 4.23%, up from 4.12% last week. 

It was the highest rate that the weekly survey has recorded since May 1, Freddie Mac reported.

The average for a 15-year fixed-rate loan rose to 3.37% from 3.26%, according to the survey, released Thursday. The start rate for mortgages that become adjustable after five years at a fixed rate rose to 3.06% from 2.99%. 

Translated into the terms borrowers actually receive, the increase would mean a loan at 4.25% interest per year instead of 4.125%. The monthly payment on a 30-year, $350,000 fixed-rate loan would rise from $1,696 to $1,722.

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Consumers thinking about whether to buy homes have been getting mixed signals from housing market indicators.

Sharp price increases of recent years have leveled off, with many sellers having to cut their asking prices in order to find buyers. Surveys show home builder confidence is at its highest level in nine years, but housing starts dropped more than forecast in August.

Freddie Mac’s weekly survey asks lenders about the terms they are offering on loans up to $417,000 to solid borrowers with 20% down payments or equivalent equity if they are refinancing.

The borrowers would have paid about half of 1% of the loan amount in upfront lender fees and discount points to obtain the rates. 

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The increases were fueled in part by an uptick in the yield, or effective interest rate, that investors are demanding on 10-year Treasury notes, a benchmark for long-term home lenders, noted Frank Nothaft, Freddie Mac’s chief economist.  

The yield on the 10-year note, which dipped to near 2.3% at the end of August, has risen recently to about 2.6% -- a level it last touched in early July.  

Investors are warily watching the Federal Reserve wind down a huge economic stimulus program it has pursued for six years. To keep long-term interest rates low, the Fed has bought trillions of dollars in Treasury securities and mortgage bonds issued by government-backed Freddie Mac, Fannie Mae and Ginnie Mae.

On Wednesday, the central bank announced that it would further reduce its purchases of these securities, keeping it on track to end the so-called quantitative easing program next month.

Bank and home lending trends @ScottReckard


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