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Mortgage Rates Rise as Inflation Concerns Grow
With the financial markets somewhat jittery over inflation and a bit concerned about the course of Federal Reserve policy over the balance of the year, mortgage interest rates advanced last week in Freddie Mac's weekly Primary Mortgage Market Survey, leaving the rate on one-year adjustable-rate loans at their highest level since 2001.
“Stronger than expected gains in manufacturing and service industries — coupled with higher labor costs — ignited inflation concerns, which led to the rise in mortgage rates this week,” said Freddie Mac's chief economist, Frank Nothaft.
The rate on a 30-year fixed-rate mortgage averaged 6.37% last week, up from 6.24% the previous week and 5.85% for the same week in 2005. This was their highest level since Sept. 5, 2003, when they were 6.44%.
One-Year Treasury-indexed ARMs averaged 5.45% last week, up from 4.24% just one year earlier. This was their highest level since Sept. 21, 2001, when they averaged 5.58%.
The average for 15-year fixed-rate mortgages rose to 6.0% last week from 5.89% the week before, their highest level since July 5, 2002, when they averaged 6.03%.
And five-year Treasury-indexed hybrid ARMs averaged 6.03%, up from 5.97% during the previous week and 5.22% a year earlier.
“Financial markets are beginning to think that the Fed will hike rates three more times this year, instead of two, putting upward pressure on mortgage rates,” said Nothaft.
“Although the signs are mixed, the housing industry is now beginning to shift into slower gear,” Nothaft said, “and higher mortgage rates will only strengthen that change. However, we see no signs of a bursting bubble, but rather a return to a more normal pace of activity.”
Mortgage rates had shown some small signs of softening in February.
 Where Are the Top 100 Metropolitan Areas for 2006?
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 Attend the Spring Construction Forecast Conference in April
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For more information, visit www.nahb.org/cfc.
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