 Mortgages rates see across-the-board increasesBy Martin Crutsinger
ASSOCIATED PRESS Article Last Updated: 07/24/2008 06:31:55 PM PDT
WASHINGTON — Mortgage rates shot up this week with 30-year mortgages climbing to the highest level in nearly a year, reflecting concerns in financial markets about the troubles at corporate giants Fannie Mae and Freddie Mac. Freddie Mac reported Thursday that its nationwide survey showed rates on 30-year mortgages surged to 6.63 percent this week, up sharply from 6.26 percent last week. That represented the highest level for 30-year mortgages since they stood at 6.68 percent the week of Aug. 1. Other mortgage rates showed similar hefty increases which analysts attributed to financial market jitters over rising mortgage losses at Fannie and Freddie. Analysts said that the rising cost of funds for Fannie and Freddie had an immediate impact on the nationwide average for all mortgage rates since both companies are such big players. Fannie and Freddie either own or guarantee nearly half of the nation's mortgages. The House on Wednesday approved and sent to the Senate legislation that would expand the government's powers to provide billions of dollars in loans. and make direct purchases of Fannie and Freddie stock if necessary to shore up finances at the companies. Supporters said the legislation, which also seeks to address a rising tide of mortgage foreclosures, should help arrest the worst slump in housing in a generation. President Bush has promised to sign it. Mark Zandi, chief economist at Moody's
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"The big rise in rates reflected the financial problems at Fannie and Freddie. We should see those rates come back down, but if they stay up, that would be a real problem for the housing industry," Zandi said. Brian Bethune, senior economist at Global Insight, attributed part of the rise in mortgage rates this week to some Fed comments that once again spooked investors into worrying about when the central bank might start raising interest rates to fight inflation pressures. Charles Plosser, president of the Fed's Philadelphia regional bank, said in a speech Tuesday that the Fed will probably need to boost interest rates "sooner rather than later" to battle inflation even if employment and financial conditions have not revived. According to the Freddie Mac survey, the nationwide average for other mortgage rates also showed big increases this week. Rates on 15-year fixed-rate mortgages, a popular option for refinancing, rose to 6.18 percent, up from 5.78 percent last week. Rates on five-year adjustable-rate mortgages rose to 6.16 percent, up from 5.80 percent last week, while rates on one-year ARMs jumped to 5.49 percent, compared to 5.10 percent last week. The mortgage rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.6 point. The fee for five-year mortgages averaged 0.7 point while the fee on one-year mortgages averaged 0.5 point this week. A year ago, rates on 30-year mortgages stood at 6.69 percent, 15-year mortgage rates averaged 6.37 percent, five-year adjustable-rate mortgages were at 6.30 percent and one-year adjustable-rate mortgages averaged 5.69 percent. ——— On the Net: Freddie Mac: www.freddiemac.com
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