Greenspan's comments trigger jump in real estate rates
June 17, 2005
30-year fixed hits 5.63% in Freddie Mac survey
Despite recent lackluster economic news, mortgage rates shot higher this week, according to surveys conducted by Freddie Mac and Bankrate.com.
In Freddie Mac's survey, the 30-year fixed-rate mortgage averaged 5.63 percent for the week ended today, up from last week when it averaged 5.56 percent. The average for the 15-year fixed-rate mortgage is 5.22 percent, up from last week when it averaged 5.14 percent. Points on both the 30- and 15-year averaged 0.5.
Five-Year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.1 percent this week, with an average 0.5 point, also higher from last week when they averaged 5.01 percent. One-year Treasury-indexed adjustable-rate mortgages averaged 4.25 percent this week, with an average 0.7 point, up slightly from last week when they averaged 4.21 percent.
"Although the 30-year mortgage rate ticked up this week, which wasn't completely unexpected, it is still below last year's annual average and well below where it was at this time last year," said Frank Nothaft, Freddie Mac vice president and chief economist. "Driven by low mortgage rates, recently released single-family housing starts for May continued to advance.
"Additionally, applications for home purchase were the highest ever recorded last week, according to the Mortgage Bankers Association, which also reported that refinancing activity reached almost 50 percent of applications over the same period. The housing industry continues to amaze us."
In Bankrate.com's survey, mortgage rates increased after a three-month low. The average 30-year fixed-rate mortgage rose from 5.61 percent to 5.73 percent, according to Bankrate.com's weekly national survey of large lenders. The mortgages in this week's survey had an average of 0.32 discount and origination points.
The 15-year fixed-rate mortgage, popular for refinancing, climbed 9 basis points from 5.24 percent to 5.33 percent. The average rate for the jumbo 30-year fixed-rate mortgage increased from 5.88 percent to 5.97 percent. This week, the average 5/1 adjustable-rate mortgage rose from 5.15 percent to 5.23 percent, while the one-year ARM increased 15 basis points from 4.49 percent to 4.64 percent.
This week's substantial rise in mortgage rates can be attributed to Alan Greenspan, chairman of the Federal Reserve, Bankrate.com reported. Early this year, he called it a "conundrum" that long-term rates had fallen since last June, even as the Fed had raised short-term rates. He said something similar in congressional testimony last week, when he called the decline in long-term interest rates among "the biggest surprises of the past year" and "without recent precedent."
Wall Street thought about Greenspan's comments overnight, and bond yields and mortgage rates rose the next morning, according to Bankrate.com. They kept rising in the following days, even in the face of weaker-than-expected economic data.
The following is a sampling of Bankrate's average 30-year-mortgage interest rates this week in some U.S. metropolitan areas.
New York - 5.73 percent with 0.2 point
Los Angeles - 5.79 percent with 0.46 point
Chicago - 5.8 percent with 0.01 point
San Francisco - 5.78 percent with 0.25 point
Philadelphia - 5.63 percent with 0.37 point
Detroit - 5.7 percent with 0.25 point
Boston - 5.76 percent with 0.11 point
Houston - 5.73 percent with 0.64 point
Dallas - 5.77 percent with 0.5 point
Washington, D.C. - 5.65 percent with 0.44 point
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