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Mortgage rates climb on fears of Fed move

Thirty-year mortgage rates rose to their highest average since December. Freddie Mac said the increase was  due to economic strength that could prompt the Fed to hike interest rates.
30-year fixed mortgage rates chart
/ Source: Reuters

U.S. 30-year fixed rate mortgages rose to their highest average since early December as recent economic data suggested the Federal Reserve may raise interest rates in the near future, mortgage finance company Freddie Mac said  Thursday.

Freddie Mac said U.S. 30-year mortgage rates averaged 5.89 percent in the latest week, up from 5.79 percent a week ago and the highest since they stood at 6.02 percent in the Dec. 5, 2003 week.

Fifteen-year mortgages also rose to an average of 5.23 percent from 5.12 percent the prior week, while one-year adjustable rate mortgages averaged 3.69 percent, up slightly from 3.65 percent.

A year ago, 30-year mortgage rates averaged 5.82 percent, 15-year mortgages 5.12 percent and the ARM 3.79 percent.

“With economic news continuing to point to a growing economy, the financial markets are beginning to think about the likelihood of inflation again,” Frank Nothaft, Freddie Mac chief economist, said in a statement.

“Not only that, but jobs creation, retail sales, and consumer prices jumped in March, which buoyed market speculation that the Federal Reserve Board will raise rates sooner than expected. Add all that to the mix and mortgage rates were bound to rise this week,” he said.

On Wednesday the Labor Department said U.S. March consumer prices rose 0.5 percent. It also said prices excluding food and energy rose 0.4 percent, the strongest reading since Nov. 2001.

The Commerce Department on Tuesday reported a 1.8 percent jump in U.S. March retail sales following a 1.0 percent rise in February.

Labor last week reported a 308,000 surge in U.S. March nonfarm payrolls. “Although economic indicators thus far suggest March was an outstanding month, we still have to see how April will fare, especially with higher -- although still moderate -- interest rates,” Nothaft said.

Freddie Mac said lenders charged an average of 0.6 percent in fees and points on 30- and 15-year mortgages, both down from 0.7 percent last week. They also charged 0.6 percent on the ARM, up from 0.5 percent last week.

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.