Mortgage rates surge to highest level in 7 months

WASHINGTON -- Rates for 30-year home loans jumped to the highest level in seven months this week, leading to a slowdown in refinancing activity, Freddie Mac said Thursday.

The average rate for a 30-year fixed mortgage was 5.59% this week, up from 5.29% last week, Freddie Mac said. The last time the average 30-year fixed rate mortgage was higher was the week ended Nov. 26 of last year, when it averaged 5.97%.

Frank Nothaft, Freddie Mac's chief economist, said the higher rates followed an increase in bond yields, a barometer for interest rates on mortgages and other loans.

On Wednesday, the government was forced to lift the yield on 10-year Treasury notes to 3.99% to lure in buyers at an auction. That was the highest yield it's offered since last August, before it started bailing out the nation's financial industry.

Though there are signs that the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow down any recovery, since borrowers would be able to borrow less money and might decide to hold off on their purchases.

Nothaft said the higher rates "are slowing refinancing activity but not demand for home purchases."

During the three-weeks ended June 5, interest rates for 30-year fixed-rate mortgages rose nearly one-half of a percentage point, Nothaft said. Conventional mortgage applications for refinancing fell each week during that period, while applications for home purchases consecutively increased, according to the Mortgage Bankers Association.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed-rate mortgage rose to 5.06%, up from 4.79% last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 5.17%, up from 4.85% last week. Rates on one-year, adjustable-rate mortgages rose to 5.04% from 4.81%.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point last week for 30-year and 15-year mortgages, and one-year adjustable rate loans. Fees averaged 0.6 point for five-year adjustable rate loans.