Wednesday, December 30, 2009

Year-end mortgage interest rates rising faster, trend to continue

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Single-digit jumps in mortgage rates for several weeks, gave way this week to larger increases in the cost of financing a home. One economist said rates will rise to more than 7 percent next year.

by Broderick Perkins
© 2009 DeadlineNews.Com

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Deadline Newsroom - Year end mortgage interest rates rising faster, more hikes expected

Single-digit jumps in mortgage rates for several weeks, gave way this week to larger increases in the cost of financing a home.

Mortgage interest rates jumped to an average 5.33 percent the week ending Dec. 29, up by 0.12 of a percent from 5.21 percent a week ago.

Compare that increase to those of recent weeks when rates rose only from 0.05 to 0.08 of a percent for fixed-rate mortgages (FRMs) on conforming 30-year loans, according to Calabasas, CA-based Informa Research Services' Interest Rate Review.

As the cost of home loans increases, the spread between current rates and rates a year ago is narrowing

A year ago the rate was 5.43 percent, little different from 5.33 percent this week.

If you've been sitting on the fence waiting for rates to fall more, you may have missed the boat.

Higher rates may be on the horizon, according to David Greenlaw, a Morgan Stanley economist. He says the 10 year Treasury yield will rise 40 percent to 5.5 next year -- unlike any increase since 1999. Tied to those yields, 30-year FRMs' interest rates will rise at least to 7.5 percent, Greenlaw told Bloomberg.

In the Dec. 29 report, Informa said the highest 30-year FRM, with an average annual percentage rate (APR) of 6.96 percent was unchanged from last week. The lowest average, 4.60 percent dropped from 4.85 percent a week ago, according to Informa, a market research, analyses, and intelligence gathering service for the financial industry since 1983.

The average 15-year FRM came in Dec. 29 at 4.73 percent, up from 4.63 percent a week ago, was down from 5.10 percent this time last year.

The average interest rate for the 5/1 adjustable rate mortgage (ARM) was also up to 3.60 percent this week from 3.57 percent a week ago, but down from 4.42 percent last year at this time.

The FRM rates for 15- and 30-year mortgages and the 5/1 ARM rates are all based on a $200,000 purchase loan, with an 80 percent loan-to-value ratio, for an owner-occupied, single-family residence.

Informa's National APR (annual percentage rates) numbers are tallied from the interest rates of some 200 mortgage originators.

Informa also reported the average rate for 30-year, non-conforming jumbo loans, 6.35 percent, rose from 6.27 percent a week ago. The jumbo rate remained well off the average 7.13 percent rate this time last year, but that gap is narrowing too.

The jumbo averages are based on a $450,000 purchase loan with an 80 percent loan-to-value ratio for an owner-occupied, single-family residence.

Rates were unchanged for home equity lines of credit (HELOCs) of $50,000, with an 80 percent loan-to-value note. Dec. 29, the variable rate came in at an average 5 percent, unchanged for several weeks, but up from 4.48 percent a year ago.

The average FRM rates on 15-year home equity loans of $50,000, with an 80 percent loan-to-value note came in at 7.45 percent about the same as 7.44 percent a week ago. This loan rate averaged 7.94 percent a year ago.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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