Mortgage Rates Jump to New High

By Mike Colpitts

Borrowing rates for home mortgages jumped above 4.00% for the first time since last October on 30-year fixed rate mortgages, hitting 4.08% home sale this week, the highest they have been in six months, according to Freddie Mac.

The jump in rates was driven by higher returns being paid for U.S. Treasuries to investors and a sampling of better economic news. The jump seems to be evident in most areas of the nation and could represent a change in the direction of home borrowing costs to higher mortgage rates charged by many lenders.

The 30-year mortgage averaged 3.92% just a week ago. Lenders have been setting higher rates as an increase in yields developed paid to investors on bonds. The jump in bond rates came after months of unusually low rates for investors amid financial crisis after financial uncertainty across the globe. A deal struck on the Greek debt crisis may have also helped to settle down financial markets for a time.

The rate on the 15-year fixed rate mortgage also jumped to 3.30%, up from last week when the loan averaged 3.16%. The shorter term mortgage was much higher a year ago, however, averaging 4.04%.

Economic uncertainty was also tempered this week by other upbeat financial news. An improving assessment of the economy by the Federal Reserve helped to boost Wall Street, which has been on a run for months, topping 13,000 on the Dow Jones Industrial average for the first time in 10 years.

“Consumers continued to reduce their debt burdens in the fourth quarter of 2011,” said Freddie Mac chief economist Frank Nothaft. “Homeowners reduced their financial obligations ratio to the lowest point since the second quarter of 1994.”

The 5-year Treasury indexed hybrid adjustable rate mortgage also jumped this week, reaching 2.96%, an increase of 13 basis points from last week. The 1-year ARM rose to 2.84%, from 2.79% a week ago.