Mortgage rates for 30-year U.S. loans jumped to a seven-month high, increasing borrowing costs for homebuyers as the real estate industry struggles to recover.
The average rate for a 30-year fixed loan rose to 4.83 percent in the week ended today from 4.61 percent, Freddie Mac said in a statement. The average 15-year rate increased to 4.17 percent from 3.96 percent, the mortgage-finance company said.
Borrowing costs have climbed for five straight weeks since hitting a record low last month. Mortgage rates are tracking a surge in bond yields amid a Federal Reserve plan to buy $600 billion of debt and speculation that President Barack Obama’s agreement to extend tax cuts will bolster growth and inflation.
“Market concerns over stronger economic growth that, in the near term, could lead to an increase in inflation have sparked a rise in bond yields and mortgage rates have followed,” Frank Nothaft, vice president and chief economist of McLean, Virginia- based Freddie Mac, said in the statement.
Mortgage applications in the U.S. fell for a third straight week as rising borrowing costs discouraged purchases and refinancing, the Mortgage Bankers Association said yesterday. The Washington-based group’s applications index declined 2.3 percent in the week ended Dec. 10. Purchases slid 5 percent, while the refinancing gauge decreased 0.7 percent.
Housing demand, which slowed with the expiration of a federal homebuyer tax credit in April, is being weighed down by unemployment near 10 percent and a deepening foreclosure crisis. The five-week rise in the 30-year rate has pushed the monthly cost of a $300,000 loan to $1,579 from $1,462.
New home construction remains near a record low. Housing starts in November rose to a 555,000 annual rate, up 3.9 percent from October, the Commerce Department reported today. Starts reached a pace of 2.27 million in January 2006.
To contact the editor responsible for this story: Kara Wetzel in New York at firstname.lastname@example.org