Bankrate – Mortgage Rates Surge to 3-Month High

RISMEDIA, Oct. 31, 2008-Mortgage rates bounded higher this week, with the average 30-year fixed mortgage rate soaring from 6.32% to 6.77%. According to Bankrate.com’s weekly national survey, the average 30-year fixed mortgage has an average of 0.39 discount and origination points.

The average 15-year fixed rate mortgage jumped to 6.46%, while the average jumbo 30-year fixed rate climbed to 7.95%. Adjustable mortgage rates were mixed, with the average 1-year ARM dipping to 6.09% and the average 5/1 ARM increasing to 6.67%.

Mortgage rates have been jerking violently up and down in recent weeks, with fixed mortgage rates hitting the highest point since the week of July 23rd. This week’s big increase came without corresponding volatility in benchmark Treasury yields. The catalyst for higher mortgage rates were the expansion of mortgage credit spreads – the difference in yields on mortgage- backed securities versus those of risk-free Treasury yields – to the highest level since 1986. The spreads, now hovering near 300 basis points, are up from the customary 180 basis point that were commonplace prior to the onset of the credit crunch in Aug. 2007. Higher funding costs for Fannie Mae and Freddie Mac, despite being under government conservatorship, have contributed to the expansion of mortgage credit spreads and the increase in mortgage rates.

The recent volatility in mortgage rates hits fence-sitting mortgage shoppers in the wallet. At last week’s rate of 6.32%, a $200,000 loan carried a monthly payment of $1,240.55. This week, with the average rate at 6.77%, the monthly payment on a $200,000 loan is $1,299.86.

Survey Results

30-year fixed: 6.77% — up from 6.32% last week (avg. points: 0.39)
15-year fixed: 6.46% — up from 5.93% last week (avg. points: 0.44)
5/1 ARM: 6.67% — up from 6.49% last week (avg. points: 0.50)

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.