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Mortgage rates edge higher

Rates on U.S. 30- and 15-year fixed mortgages rose slightly this week and are likely to increase further next week, mortgage finance company Freddie Mac said  Thursday.
30-year fixed mortgage rates chart
/ Source: Reuters

Rates on U.S. 30- and 15-year fixed mortgages rose slightly this week and are likely to increase further next week, mortgage finance company Freddie Mac said  Thursday.

Freddie Mac said U.S. 30-year mortgage rates stood at an average of 5.68 percent this week, up slightly from a six-month low of 5.64 percent the prior week. Fifteen-year mortgages averaged 4.97 percent compared with 4.95 percent last week, while the one-year adjustable rate rose to 3.59 percent from 3.56 percent last week.

The U.S. Federal Reserve’s policy-setting Federal Open Market Committee on Wednesday dropped a previous prediction that interest rates would stay low “for a considerable amount of time.”

The Fed has kept the overnight bank-lending rate at 1 percent since last June and has not raised interest rates since 2000.

The shift in the Fed’s language led many investors to guess that a rate hike could happen sooner then they had been expecting, pushing up the market-set interest rates on which mortgages are based.

“Following the (FOMC’s) policy statement, bond yields shot up, taking mortgage rates with them, raising the prospect that mortgage rates will be even higher next week,” Frank Nothaft, Freddie Mac chief economist, said in a statement.

A year ago, 30-year mortgages averaged 5.90 percent, 15-year mortgages 5.28 percent and the one-year ARM 3.89 percent.

“However, even at higher levels next week, mortgage rates remain incredibly low and affordable and shouldn’t starve off the demand for housing in 2004,” said Nothaft.

The housing market remains strong despite mixed data earlier this week.

The Commerce Department said on Wednesday that U.S. December new home sales dropped 5.1 percent to a seasonally adjusted 1.060 million unit annual rate from an upwardly revised rate of 1.117 million in November.

Sales of existing homes surged in December. The National Association of Realtors said on Monday existing home sales rose 6.9 percent last month to an annual rate of 6.47 million units.

Freddie Mac said lenders charged an average of 0.7 percent in fees and points on 30- and 15-year mortgages, both up from 0.6 percent a week ago. They charged 0.6 percent on the ARM, down from 0.7 percent.

Freddie Mac is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities for investors or holds them in its own portfolio.