Rates on 30-year mortgages climbed for a third straight week, pushing the level to the highest point this year.
Freddie Mac’s weekly survey released Thursday showed that rates on 30-year, fixed rate mortgages averaged 5.79 percent for the week ending March 1, up from 5.69 percent last week.
It was the third consecutive weekly increase after 30-year mortgages had fallen for six straight weeks, hitting a low for this year of 5.57 percent the week of Feb. 10. Rates now stand at the highest level since the 30-year mortgage averaged 5.81 percent during the last week of 2004.
Analysts said the latest rate increase occurred because bond market investors are becoming concerned that long-term rates are too low in view of signals from Federal Reserve policy-makers that they intend to keep pushing short-term rates higher to make sure inflation stays under control.
“Concern that long-term interest rates are too low and comments from Fed officials this week helped push mortgage rates higher,” said Frank Nothaft, chief economist for Freddie Mac.
Sales of both new and existing homes set records in 2004 for the fourth straight year. But analysts are forecasting a slight falloff in the sales pace this year as rates continue rising.
However, many economists believe the rate of increase will be slow, reflecting the Fed’s gradual pace in pushing short-term rates higher. They are forecasting that the 30-year mortgage will be around 6.5 percent by the end of this year.
Nothaft noted that home values rose nationally by more than 10 percent in 2004, the strongest annual growth since 1979.
“As mortgage rates begin to trend upward we expect the rate of house price appreciation to begin to slow to perhaps 7 percent or 8 percent nationally this year,” he said.
Rates on 15-year, fixed-rate mortgages, a popular option for refinancing, rose to 5.33 percent this week, up from 5.22 percent last week. Rates on one-year adjustable-rate mortgages edged down slightly to 4.14 percent, compared to 4.16 percent last week.
Five-year hybrid adjustable-rate mortgages averaged 5.17 percent this week, up from 5.05 percent last week. These hybrid mortgages have a fixed-rate for five years and then adjust each year after that.
The nationwide averages for mortgage rates do not include add-on fees known as points. The thirty-year mortgage and the five-year ARM carried a fee of 0.7 point. The 15-year mortgage had a 0.6 point fee and the one-year ARM carried a fee of 0.8 point.
A year ago, 30-year mortgages averaged 5.59 percent while the 15-year mortgage was at 4.88 percent and the one-year ARM was at 3.47 percent. Freddie Mac does not have historical data yet on the five-year ARM.