Mortgage Rates Jump After Hitting Record Lows

By Ryan Jackson
For the first time in more than two months, mortgage rates jumped higher as lenders reversed course, setting the average rate for a fixed pending sale 30-year mortgage at 3.71%, according to Freddie Mac. The shift could signal a change in rates to come. The rate on the 15-year fixed also saw a jump of four basis points.

The jump in mortgage rates resulted from higher yields being paid to investors purchasing U.S. Treasuries. Bonds had reached a record low, dipping just below 1.45% last week before climbing again. The rate on the 15-year fixed rate loan, which are gaining in popularity especially with the massive mortgage refinancing surge, moved to an average of 2.98%.

The 5-year adjustable rate home loan, however, dropped slightly to hit 2.80% this week with an average of 0.6 point, according to the Freddie Mac survey which accounts for about three-quarters of all U.S. mortgages.

The seldom purchased 1-year ARM averaged 2.78% for the week, a single basis point drop from last week.

“Fixed mortgage rates edged up slightly from record lows during a mild week of economic data,” said Freddie Mac chief economist Frank Nothaft. “The Federal Reserve Board reported that household net worth rose by $2 trillion to $62.9 trillion over the first three months of 2012 primarily due to increases in stock markets.”

The Fed’s remarks came just prior, however, to a report that U.S. average household wealth has dropped 39% for most Americans since the start of the financial crisis, mainly because of a lack of equity in homeownership.

TARP and other Fed driven bail-outs are also largely behind the stock market’s increase as businesses hold on to their cash, with more than $2 trillion in cash savings on corporate balance sheets.