Originally created 06/18/04

Rise in mortgage rates won't hurt market, economists say



WASHINGTON - Rates on 30-year and 15-year mortgages rose this week, a trend that isn't expected to clip the wings of the housing market, economists said.

In its weekly nationwide survey of rates, mortgage company Freddie Mac reported Thursday that rates on benchmark 30-year, fixed-rate mortgages climbed to 6.32 percent for the week ending June 17, up from 6.30 percent last week.

Thirty-year mortgage rates hit a low this year of 5.38 percent the week ending March 18. Since then, they have slowly moved upward.

Rates for 15-year, fixed-rate mortgages also rose this week to 5.70 percent, up from 5.67 percent last week. But rates for one-year adjustable rate mortgages dipped to 4.13 percent, down slightly from 4.14 percent last week.

The recent rise in mortgage rates comes in anticipation of the Federal Reserve raising a key short-term interest rate for the first time in four years June 30.

"The recent increase in mortgage rates has given the housing market a slight breather from the frantic pace in lending that has been prevalent over the last few years," said Frank Nothaft, Freddie Mac's chief economist.

Rates on 30-year mortgages could rise to 6.9 percent by the end of this year, which would still be considered low by historical standards, according to some economists' estimates. But they believe an improved labor market will help offset the impact of rising rates and support demand for homes.

Some economists are forecasting sales of previously owned homes to set a new record this year and believe sales of new homes will finish up close to a record high.

This time a year ago, rates on 30-year mortgages averaged 5.21 percent, rates for 15-year mortgages stood at 4.60 percent and rates on one-year adjustable rate mortgages averaged 3.54 percent.

The nationwide averages for mortgage rates do not include add-on fees known as points. Thirty-year and 15-year loans each carried an average fee of 0.5 point this week, and one-year adjustable rate mortgages carried an average fee of 0.7 point.

In a separate report, refinancings accounted for 33.8 percent of total mortgage loan applications filed last week, up from 32.6 percent in the previous week, the Mortgage Bankers Association said.