Mortgage Rates Rise as Credit Crunch Intensifies

RISMEDIA, Oct. 3, 2008-Mortgage rates increased for the third consecutive week, with the average 30-year fixed mortgage rate rising to 6.41%. According to Bankrate.com’s weekly national survey, the average 30-year fixed mortgage has an average of 0.42 discount and origination points.

The average 15-year fixed rate mortgage popular for refinancing notched higher to 6.14%, while the average jumbo 30-year fixed rate climbed to 7.65%. Adjustable mortgage rates were mixed, with the average 1-year ARM sharply lower at 6.04% while the average 5/1 ARM jumped to 6.49%.

Mortgage rates moved higher this week despite benchmark Treasury yields being largely unchanged versus one week ago. The tightening grip of the credit crunch means a return to wider mortgage spreads, representing the difference between mortgage rates and the risk-free ten-year Treasury.

Although this risk premium had narrowed following the government takeover of Fannie Mae and Freddie Mac, spreads widened following the defeat of the financial rescue package. Unhappy mortgage shoppers can contact their Congressional representatives.

This year has been a wild ride for mortgage rates, with a low in January of 5.57% and a high of 6.77% in July. At today’s rate of 6.41%, a $200,000 loan carries a monthly payment of $1,252.32.

Survey Results

30-year fixed: 6.41% — up from 6.32% last week (avg. points: 0.42)
15-year fixed: 6.14% — up from 6.11% last week (avg. points: 0.44)
5/1 ARM: 6.49% — up from 6.38% last week (avg. points: 0.41)

Bankrate’s national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For more information, visit http://www.bankrate.com/mortgagerates