Mortgage Rates Rebound Sharply

By:: Peter King | November 19, 2010

Mortgage rates posted their first increase in two months this week, rebounding from record lows to jump two-tenths of a percentage point over concerns over inflation and signs of a strengthening economy.

Average interest rates on 30-year fixed-rate loans were up to 4.39 percent in this week’s Freddie Mac rate survey, up from 4.17 percent last week. Average rates on 15-year fixed-rate mortgage rose to 3.76 percent, up from 3.57 percent last week.

Five-year Treasury indexed adjustable rate mortgages showed a smaller increase, rising to and average 3.40 percent, up from 3.25 percent last week. Last week’s rates set record lows in the Freddie Mac survey for all three loan types.

It was the first rate increase in eight weeks, as yields on 10-year Treasury bonds rose in the wake of the Federal Reserve’s announcement that it would buy $600 billion of government securities in a move known as qualitative easing. Concerns that the injection of so much cash into the economy might feed inflation caused interest rates to climb.

Interest rates fell the last time the Fed announced a similar move, in March 2009, but this time the Fed’s action had been widely anticipated, so any relaxing of rates seems to have already been priced into the market. Now, investors appear to be looking further down the road and focusing more on possible inflation.

Positive developments in the economy also played a factor, in the anticipation that mortgage bonds will have to begin paying higher returns to compete with other investments. Frank Nothaft, Freddie Mac chief economist, noted that retail sales in October increased twice as fast as analysts had expected, posting their biggest monthly increase since March, while consumer sentiment reached its highest level since June. Confidence among homebuilders is up slightly as well.

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National Rates

Loan Type	Today	+/-
30 yr fixed	3.72
15 yr fixed	3.03
5/1 ARM	2.75

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