Mortgage interest rates continue to rise

Saturday, March 27, 2010; F02

Mortgage interest rates rose for a second consecutive week as property sales showed falling demand for homes.

The average rate for a 30-year fixed loan rose to 4.99 percent this week from 4.96 percent last week, mortgage finance company Freddie Mac said.

The average 15-year rate was 4.34 percent, up a bit from 4.33 percent last week.

Rates on five-year, adjustable-rate mortgages averaged 4.14 percent, up from 4.09 percent. Rates on one-year, adjustable-rate mortgages rose to 4.20 percent from 4.12 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac's survey averaged 0.6 of a point.

Economists are watching mortgage rates as the Federal Reserve winds down a program to support housing by buying $1.25 trillion in bonds backed by home loans. Higher rates make homes less affordable and might reduce demand. The Fed's program is set to end Wednesday.

If mortgage rates rise sharply, the Fed could come in again and buy more bonds, said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. "They're sort of reserving that right," Brown said.

New home sales fell in February to the lowest on record as blizzards, unemployment and foreclosures depressed the market. Sales of existing homes fell in February for a third straight month.

Sales of new homes fell 2.2 percent in February to an annual pace of 308,000, the Commerce Department said Wednesday.

Sales of previously owned homes dropped 0.6 percent to a 5.02 million annual rate, the lowest in eight months, the National Association of Realtors said this week.

The Mortgage Bankers Association's index of mortgage applications fell 4.2 percent in the week that ended March 19. The portion of refinancings fell 7.2 percent. Applications to buy a home increased 2.7 percent.

Freddie Mac collects mortgage rates each week, Monday through Wednesday, from lenders across the country. Rates often fluctuate significantly, even within a given day, often in line with long-term Treasury bonds.

-- From News Services

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