Mortgage rates continue upward trend

updated 4:10 p.m. ET May 27, 2004

WASHINGTON - Rates on 30-year and 15-year mortgages resumed their upward march this week, a factor that could contribute to a further slowdown in home-mortgage refinancings, economists said.

Freddie Mac reported Thursday that rates on benchmark 30-year fixed-rate mortgages rose to 6.32 percent, up from 6.30 percent last week, according to the mortgage giant’s nationwide survey of rates.

Thirty-year mortgage rates, which had dipped slightly last week after an eight-week rise, had hit a low for the year of 5.38 percent the week of March 18.

Rates for 15-year fixed-rate mortgages also increased this week to 5.69 percent, compared with 5.67 percent last week. But rates for one-year adjustable-rate mortgages fell to 3.87 percent this week from 3.99 percent last week.

The nationwide averages for mortgage rates do not include add-on fees known as points. Each loan type carried an average fee of 0.6 point this week.

This time last year, rates on 30-year mortgages averaged 5.31 percent, 15-year mortgages were 4.73 percent and one-year adjustable mortgages stood at 3.63 percent.

“Current mortgage rates are now a full (percentage) point above where they were last year, and almost half a (percentage) point higher than they were last month,” said Freddie Mac’s chief economist, Frank Nothaft. “Housing will, however, continue to be a pillar of strength for the economy in the coming years.”

With the economy moving solidly ahead, economists predict mortgage rates will slowly rise in the coming months. According to some projections, rates on 30-year mortgages could reach 6.4 percent or 6.6 percent by the final quarter of this year.

Still, some economists believe home sales this year will come in close to, or possibly even surpass, the record highs seen in 2003, when ultra-low mortgage rates beckoned to buyers.

The recent rise in mortgage rates, however, is slowing refinancing activity. Refinancings accounted for 36.2 percent of total mortgage loan applications filed last week, down from 37.4 percent in the previous week, the Mortgage Bankers Association said.

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