Long-Term Rates Bump Above 5%

For the first time in three weeks, interest rates for 30-year fixed mortgages averaged more than 5 percent, ""Freddie Mac"":http://www.freddiemac.com/ reported Thursday.

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According to Freddie Mac's Primary Mortgage Market Survey, the rate for 30-year fixed mortgages for the week ending February 25, 2010 averaged 5.05 percent with an average 0.7 point, inching up from last week when it averaged 4.93 percent. However, this week's average was still slightly lower than last year at this time when the rate for 30-year fixed mortgages averaged 5.07 percent.

""Interest rates for 30-year fixed mortgages followed long-term bond yields higher and rose above 5 percent this week amid a mixed set of economic data reports"" said Frank Nothaft, Freddie Mac VP and chief economist. ""For instance, the January producer price index jumped well above the market consensus, but the consumer price index remained subdued and consumer confidence declined to the lowest level since April 2009, according to the Conference Board.""

Rates also moved higher for 15-year fixed mortgages, which averaged 4.4 percent with an average 0.7 point this week. While this was an increase from last week when it averaged 4.33 percent, it was a decrease from this same week a year ago when rates for 15-year fixed mortgages averaged 4.68 percent.

Results for adjustable-rate mortgages (ARMs) were mixed. The 5-year Treasury-indexed hybrid ARM averaged 4.16 percent with an averaged 0.6 point, up from last week when it averaged 4.12 percent. However, the 1-year Treasury-indexed ARM averaged 4.15 percent with an average 0.6 point, down from last week's average of 4.23 percent.

Some fear that mortgage interest rates will shoot up when the Federal Reserve stops buying mortgage-backed securities at the end of March, ""but according to CNBC"":http://www.cnbc.com/id/35563022, the consensus has changed. CNBC said due to the relatively calm market reaction to last week's hike of the discount lending rate and the pullback of a few other Fed liquidity measures, analysts now expect to see little or no move in mortgage rates.

CNBC quoted Kim Rupert, managing director of global fixed income analysis for Action Economics, who said, ""I don't think we'll see a major reaction and probably not a big spike higher in rates even though the market is losing one of its major actors. The market is pretty ingenious and it can fill that hole without serious consequences.""