Bankrate: Mortgage Rates Highest in Nearly 4 Years

Bond investors come to grips with short-term interest rates heading even higher
RISMEDIA, April 7, 2006?Fixed mortgage rates climbed again, with the average 30-year fixed rate mortgage rising to 6.51 percent, according to Bankrate.com’s weekly national survey of large lenders. This is the highest since the week of July 17, 2002. The 30-year fixed rate mortgages in this week’s survey had an average of 0.32 discount and origination points.

The average 15-year fixed rate mortgage, popular for refinancing, stepped up to 6.17 percent, and the average jumbo 30-year fixed rate jumped from 6.64 percent to 6.68 percent. Adjustable rate mortgages also staged increases, with the average 5/1 adjustable rate mortgage rising from 6.13 percent to 6.17 percent, and the average one-year ARM notching higher from 5.77 percent to 5.83 percent.

Mortgage rates hit the highest point in nearly four years as bond investors come to grips with the idea that short-term interest rates are headed even higher and the economy is still firing on all cylinders. In addition, an inflation gauge often used by the Fed showed a strong advance during the fourth quarter of 2005, rising at a 3.5 percent annualized pace.

This is not the type of news that will get the Fed to stop raising interest rates. As a result, with the overnight cost of borrowing headed to 5 percent in May, the cost of borrowing for ten or more years is also re-pricing higher. Fixed mortgage rates are closely related to yields on long-term government bonds. Still, the difference between short-term and long-term interest rates is very scant, meaning home shoppers are likely to see continued increases in coming months.

Fixed mortgage rates are approximately one-half of a percentage point higher than one year ago. This time last year, the average 30-year fixed mortgage rate was 6.02 percent, meaning that the monthly payment on a loan of $165,000 was $991.38. With fixed mortgage rates moving in a choppy fashion since, the average 30-year fixed rate is now 6.51 percent, meaning the same loan originated now would carry a payment of $1,044.00. Fixed mortgage rates remain an attractive refinancing alternative for adjustable rate borrowers.

Real Estate Hot Topics

Profit Center: Real Estate Tips, Training & Events

RISMedia Solutions

RISMedia on the Go

Today's Featured Listing