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30-year mortgage rates jump to 6.12%

30-year fixed mortgage rates chart
/ Source: The Associated Press

Rates on 30-year mortgages rose this week to the highest level in eight months amid signs that the economy is gaining traction and that the Federal Reserve may push short-term interest rates up this summer.

Rates on 30-year fixed-rate mortgages went up to 6.12 percent, marking the seventh consecutive weekly increase since rates hit a low for the year of 5.38 percent the week of March 18, Freddie Mac reported Thursday.

The mortgage giant's nationwide survey of rates showed that the increase, up from 6.01 percent last week, left 30-year mortgages at their highest level since they averaged 6.16 percent the week of Sept. 12.

Federal Reserve policy-makers, in deciding to hold short-term interest rates steady at 46-year low of 1 percent on Tuesday, dropped a promise to be patient before they start raising rates.

Analysts viewed that change as a step to prepare Wall Street and Main Street for an eventual rate increase. A growing number of economists believe the Fed's first rate increase in more than four years could come in August.

"A steady drip of good economic news coupled with the Federal Reserve's change of language ... reinforced market expectations that the Fed may raise rates sooner than expected," said Amy Crews Cutts, deputy chief economist at Freddie Mac.

That helped push bond rates up, causing long-term mortgage rates to rise.

Other mortgage rates rose as well this week.

Rates for 15-year, fixed-rate mortgages climbed to 5.47 percent, compared with 5.35 percent last week. It was the highest level for this popular option for refinancing since the week of Sept. 5.

For one-year adjustable rate mortgages, rates were 3.76 percent this week, up slightly from 3.75 percent last week.

The nationwide averages for mortgage rates do not include add-on fees known as points. Each loan type carried an average fee of 0.7 point this week.

This time last year, rates on 30-year mortgages averaged 5.62 percent, 15-year mortgages were 4.97 percent and one-year adjustable mortgages stood at 3.66 percent.

Some analysts worry that a bubble in home prices, which have continued to climb, will at some point burst. Although house prices should be closely monitored, Fed Chairman Alan Greenspan said in a speech Thursday, "a destabilizing contraction in nationwide house prices does not seem the most probable outcome."