30-Year Rate Rises to 2-Month High

Rates on 30-year mortgages jumped this week to the highest level since mid-March as investors began to worry about what the Federal Reserve will do to combat growing inflation pressures.

Freddie Mac, the mortgage company, reported yesterday that 30-year fixed-rate mortgages averaged 6.08 percent this week. That was up from 5.98 percent last week.

Financial markets this week pushed the yield on 10-year Treasury bonds above 4 percent for the first time in five months, signaling greater concern about Fed action.

"Mortgage rates drifted up this week over market concerns that the Federal Reserve Board may raise short-term interest rates later this year," said Frank E. Nothaft, Freddie Mac's chief economist.

Richard Fisher, head of the Fed's regional bank in Dallas, said Wednesday night that if inflationary developments continue to worsen, "I would expect a change of course in monetary policy to occur sooner rather than later, even in the face of an anemic" economy.

Comments such as those have prompted concerns among bond investors that the Fed, which cut rates aggressively starting in September, may switch course and begin raising rates later this year.

Most other types of mortgage rates showed increases this week, according to the Freddie Mac survey.

The average rate on 15-year, fixed-rate mortgages rose to 5.66 percent from 5.55 percent, and five-year, adjustable-rate mortgages edged up to 5.62 percent from 5.61 percent. However, the average rate on one-year ARMs slipped, to 5.22 percent from 5.24 percent.

The housing market is facing numerous headwinds, including slumping prices, which are keeping potential buyers on the fence, and rising mortgage defaults, which are dumping more homes on an already glutted market. In addition, many banks have raised their lending standards in response to the surge in mortgage defaults.

The average mortgage rates do not include add-on fees known as points. The nationwide average fee for 30-year and 15-year fixed mortgages and one-year adjustables was 0.6 point. The five-year ARM had an average fee of 0.5 point.

A year ago, rates on 30-year mortgages stood at 6.42 percent, 15-year mortgage rates averaged 6.12 percent, five-year adjustable-rate mortgages were at 6.19 percent and one-year adjustable-rate mortgages were at 5.57 percent.

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