Mortgage Rates Bounce Higher

By Mike Colpitts

Mortgage interest rates bounced higher for the third week in a row as the 30-year fixed rate loan jumped to average 3.62%, according to Freddie Mac. The bounce in rates camerates as a result of higher yields paid to investors for U.S. Treasuries, which may signal a major shift in financial markets.

The fixed 15-year mortgage also moved higher four basis points to average 2.88% from last week when it averaged 2.84%. The move to higher rates came after hitting new all-time record lows for almost two months straights, bottoming out at 3.49% on the 30-year fixed.

A sluggish U.S. economy and slow home sales are dragging the housing market recovery out as fewer consumers shop for homes with high unemployment.

“The latest economic indicators point toward low inflation but gradually stronger economic activity, which placed further upward pressure on long term Treasury yields, and in turn mortgage rates,” said Freddie Mac chief economist Frank Nothaft.

The consumer price index fell for the second month in a row during July 2.1% to keep inflation in check. But weak consumer sales and other troubles hamper the economy from a full recovery.

The 5-year Treasury indexed hybrid adjustable rate mortgage averaged 2.76% for the week, a slight single basis point higher than last week, according to the Freddie Mac survey. The survey accounts for about 75% of all U.S. mortgages.

The 1-year ARM shot up four basis points to average 2.69%. Rates are expected to increase further by many housing analysts who see the recent bounce in rates as the beginning of a trend, despite the Federal Reserve vowing to keep the rate it charges banks to borrow money at historic lows.