WASHINGTON – Interest rates on 30-year mortgages rose to their highest level since December amid concern that long-term rates are poised to increase, according to a report issued Thursday by mortgage finance company Freddie Mac (FRE).
Rates on 30-year mortgages rose to an average of 5.79 percent in the week ending March 3 from 5.69 percent a week earlier. It was the highest level for 30-year mortgage rates since 5.81 percent in the week ended Dec. 30.
Rates of 15-year mortgages also rose in the latest week, to an average of 5.33 percent from 5.22 percent, the highest since 5.40 percent in the first week of August 2004.
One-year adjustable-rate mortgages (search) (ARM) averaged 4.14 percent, down slightly from 4.16 percent last week.
A year ago, 30-year mortgage rates averaged 5.59 percent, 15-year mortgages 4.88 percent, and the ARM 3.47 percent.
"Concern that long-term interest rates are too low and comments from Fed officials this week helped push mortgage rates higher this week," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.
"We've been expecting this for some time, so the rise in rates for the third consecutive week doesn't really come as a surprise to the market," Nothaft said.
U.S. construction spending (search) climbed 0.7 percent in January as both private and public construction hit record levels, the Commerce Department said on Tuesday.
Construction put in place in January increased to a record $1.047 trillion annual rate, compared with an upwardly revised $1.040 trillion rate in December.
But the department also reported this week that sales of new U.S. homes dropped 9.2 percent in January.
Sales of new one-family homes hit a 1.106 million unit annual rate in January, the slowest pace since July 2004 and off from December's upwardly revised 1.218 million unit rate, Commerce reported.
The housing market has supported recent economic growth despite short-term interest rate increases by the Federal Reserve. U.S. 30-year mortgage rates have not risen above 6 percent since late last July.
During the recession, it was the housing market that remained robust as low mortgage rates pushed home owners to refinance and prospective buyers to take out large loans to make their first purchases.
Freddie Mac said lenders charged an average of 0.7 percent in fees and points on 30-year mortgages and 0.8 percent on the one-year ARM in the latest week, both unchanged from last week. Lenders charged an average of 0.6 percent on 15-year mortgages, down from 0.7 percent.
Freddie Mac said the hybrid "5/1" ARM, set at a fixed rate for five years, then adjustable each year thereafter, averaged 5.17 percent in the latest week, up from 5.05 percent last week.
Freddie Mac is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities for investors or holds them in its own portfolio.