Mortgage Rates Soar on Inflation Fears
Concerns about inflation helped push mortgage rates near a one-year high, according to data released Thursday morning by Freddie Mac (FRE). The average rate on a 30-year fixed rate mortgage rose 37 basis points to 6.63 percent with an average 0.6 point for the week ended July 24; 15-year fixed-rate mortgages saw average rates jump 40 basis points to 6.18 percent, Freddie said. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 6.16 percent, up sharply from last week's 5.80 percent. One year ago, however, the 5-year ARM averaged 6.30 percent -- so perhaps it's best not to get entirely carried away. “Market concerns about rising inflation, further weakness in the housing market and greater probability that the Federal Reserve will raise short-term rates this year all combined to push mortgage rates higher this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. Nothaft didn't mention it, but rampant investor fear over the future of both Freddie Mac and twin GSE Fannie Mae (FNM) didn't help rates much, either, at least according to HW's sources. The Wall Street Journal reported Wednesday that investor fear that one or both GSEs might pull back on purchasing activity is a chief culprit behind the jump in rates. That said, inflation clearly has been put into the driver's seat, as well. "Some of the key drivers to these concerns [inflation] were consumer prices jumping 1.1 percent (annualized) in June – the largest increase since September 2005 on a year-over-year basis – coupled with consumer prices growing at a 5.0 percent clip (on a year-over-year basis), the strongest since February 1991," said Nothaft. "Additionally, home prices fell 4.8 percent between May 2007 and 2008, according to the Office of Federal Housing Enterprise Oversight’s monthly house price index. And new construction of one-unit homes fell to 604,000 units in June, the slowest pace since January 1991." For more information, visit http://www.freddiemac.com. Sidenotes: A separate rate survey conducted by Bankrate.com found rates jumping above their one-year highs, with the 30-year fixed-rate mortgage rising 35 basis points, to 6.77 percent ... Bankrate's Holden Lewis has the story of Michael Moskowitz, president of New York-based mortgage lender Equity Now, who blames the government for the jump in rates and is "infuriated" at new mortgage regulations issued last week by the Federal Reserve .... note to Mike: the Fed's requirements aren't effective until next year, so do us a favor and calm down. Disclosure: The author was long FRE and held no positions in FNM when this story was written; further indirect holdings may exist, however, via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.