30-Year Rates Rise as Economy Slides
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Rates on 30-year, fixed-rate mortgages rose this week as reports showed a worse-than-expected plunge in the nation's gross domestic product and continuing elevated levels of jobless claims, Freddie Mac said Thursday.
The average rate on a 30-year mortgage increased to 5.15 percent this week from 5.07 percent last week. A year ago, such mortgages averaged 6.03 percent.
"With the federal debt probably widening quite a bit here, that's going to put some upward pressure on rates," said George Mokrzan, senior economist at Huntington National Bank in Columbus, Ohio.
The U.S. government may need to increase the amount of debt it issues in coming years to pay for federal spending plans, which in turn may boost interest rates, Mokrzan said. Greater supply of U.S. Treasury securities would increase yields and probably push mortgage rates higher, cutting housing demand and reducing home affordability.
Freddie Mac chief economist Frank E. Nothaft said mortgage rates followed a rise in bond yields after the Commerce Department reported that gross domestic product plunged in the fourth quarter of 2008 at an annual rate of 6.2 percent, the worst showing in a quarter-century.
Jobless claims hit 670,000 for the week ended Feb. 21, the most since October 1982, when the economy was emerging from a severe downturn. Thursday, the Labor Department said the figure slipped to 639,000 last week.
"The housing market continues to slow, as well," Nothaft said, noting that new-home sales fell 10.2 percent in January to the slowest pace since records began, in January 1963.
Pending existing-home sales slowed by 7.7 percent, he added.
A report from First American CoreLogic showed that in the fourth quarter, more than 8.3 million, or one in five, U.S. mortgage holders owed more on their loans than their property was worth.
Average rates for 30-year, fixed-rate mortgages hit a record low of 4.96 percent in January, a decline attributed to the Federal Reserve's move to buy $500 billion in mortgage-backed securities to spur lending by banks.
This week's average rate on a 15-year, fixed-rate mortgage rose to 4.72 percent from 4.68 percent last week. Last year at this time, the 15-year rate averaged 5.47 percent.
The average rate on five-year, adjustable-rate mortgages increased to 5.08 percent from 5.06 percent. The rate on one-year adjustables rose to 4.86 percent from 4.81 percent last week.
The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point for 30-year and 15-year, fixed-rate mortgages.
The fee for five-year, adjustable-rate mortgages averaged 0.6 point, with 0.5 point for one-year, adjustable mortgages.
