30-Year Mortgage Rates Rise Again

Washington Post, February 4, 2006

Mortgage rates around the country went up this week, with rates on 30-year mortgages climbing to their highest since late December.

Mortgage company Freddie Mac, in its weekly nationwide survey released Thursday, reported that rates on 30-year, fixed-rate mortgages rose to 6.23 percent for the week ending Feb. 2. That was up from 6.12 percent last week and was the highest rate since the week ending Dec. 22.

Rates are rising with investors' concerns about inflation.

"Declines in worker productivity coupled with accelerating labor costs increase the threat of inflation down the road," said Frank E. Nothaft, Freddie Mac's chief economist. "Inflationary pressure generated by these two factors pushes long-term mortgage rates upward, which is why we have seen rates rise these last two weeks."

Before that, rates on 30-year mortgages had been drifting downward.

Meanwhile, rates on 15-year, fixed-rate mortgages, a popular choice for refinancing home mortgages, averaged 5.81 percent this week, up from 5.70 percent last week. One-year adjustable rate mortgages increased to 5.33 percent this week, compared with 5.20 percent last week. Rates on five-year hybrid adjustable rate mortgages rose to 5.87 percent this week, from 5.75 percent last week.

Rising mortgage rates also come after the Federal Reserve's decision Tuesday to raise a key short-term interest rate to its highest in nearly five years -- an action aimed at fending off inflation.

The mortgage rates do not include add-on fees known as points. The 30-year and 15-year mortgages, and the five-year hybrid adjustable rate mortgage, each carried a nationwide average fee of 0.5 point. One-year adjustable rate mortgages had an average fee of 0.7 point.

A year earlier, 30-year mortgages averaged 5.63 percent, 15-year mortgages stood at 5.14 percent, one-year adjustable-rate mortgages were at 4.23 percent and five-year hybrid adjustable rate mortgages averaged 5.00 percent.

"Mortgage rates will surely fluctuate in the weeks and months ahead, but the trend now is for higher rates over the long run," Nothaft said.

The Mortgage Bankers Association predicted that 30-year mortgage rates will rise to about 6.4 percent by the end of this year. Some analysts, however, think that rate could end the year closer to 7 percent, if inflation picks up. Either way, rising rates are expected to slow home sales this year.