By Kevin Chiu
Pressured by unrest in the Middle East and fallout over disasters in Japan, mortgage rates jumped higher during the week as lenders became increasingly concerned about world finance markets, according to Freddie Mac. The average rate on a fixed 30-year mortgage had a jump of .05 basis points to an average of 4.81%.
Rates, however, are still below year-ago levels when the same loan was at 4.99%. The rate on a 15-year fixed rate loan also jumped higher to 4.04% up from last week when it was 3.97%. Mortgage rates on all of the loans Freddie Mac tracks moved higher during the week with the 5-year adjustable rate loan averaging 3.62%, a jump from 3.57% the previous week.
“The rate uptick was related to higher than anticipated inflation data for February and ongoing geopolitical concerns,” said Frank Nothaft, Freddie Mac chief economist. “The 12 month growth rate in the consumer price index rose 2.1% in February, compared to 1.6% in January. However, most of the increase was due to food and energy prices, which tend to be volatile.”
Consumer fears over the weak economy and the lack of an economic recovery in many regions of the country, where unemployment is still at near record highs has sent jitters into the housing market. Existing home sales fell 9.6% from January to February and were 2.8% lower again in February.
A drop in new home sales for the second month saw the New Home Builders index decline to its lowest level since 1963. “The housing market recovery experienced a setback during the start of this year,” said Nothaft.
New construction on single family homes also dropped 11.8% in February to the third slowest pace since just after World War II in 1959. Interest rates are still at some of their lowest levels since the economy went into a recession more than two years ago, but high unemployment hampers the housing market in many regions of the country.