Mortgage rates jump again

Mortgage rates have risen four weeks in a row, to their highest level since the first week of November, as investors bet on economic recovery.

The benchmark 30-year fixed-rate mortgage rose 11 basis points, to 5.24 percent, according to the national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.45 discount and origination points. One year ago, the mortgage index was 5.84 percent; four weeks ago, it was 5 percent.

The benchmark 15-year fixed-rate mortgage rose 9 basis points, to 4.62 percent. The benchmark 5/1 adjustable-rate mortgage rose 10 basis points, to 4.7 percent.

Mortgage rates are advancing along with rates and yields on other long-term debt. For example, the yield on the 10-year U.S. Treasury is up more than 40 basis points compared to four weeks ago. Over the same period, the benchmark 30-year fixed-rate mortgage has risen 24 basis points.

According to the consensus explanation on Wall Street, long-term interest rates and bond yields are rising because investors have begun to favor stocks. When stock prices rise, bond yields usually rise, too. Higher bond yields create an incentive for investors to keep money in bonds.

Weekly national mortgage survey
Results of's Dec. 23, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:5.24%4.62%4.7%
Change from last week:+0.11+0.09+0.1
Monthly payment:$910.11$1,272.38$855.75
Change from last week:+$11.2+$7.61+$9.89

Stock prices have been rising because the economic news appears to be fairly positive. Investors seem to be betting on economic recovery in 2010.

It's a mixed picture in housing, though. For one thing, there's this four-week rise in mortgage rates. In Bankrate's weekly survey, the 30-year fixed hasn't been this high since Nov. 4, when it was 5.35 percent. Mortgage applications fell more than 10 percent last week -- and that's a seasonally adjusted number that takes into account that late December typically is a quiet time at mortgage offices.

Real estate sales figures further muddy the picture. Home resales were up in November, but prices were down. And sales of new homes cratered.

According to the National Association of Realtors, home resales went up 46 percent in November year over year. The Realtors say 472,000 houses were resold last month, compared to 322,000 resales in November 2008. But sales in November fell 5 percent from the previous month.

Part of the October-to-November decline can be attributed to the fact that November is a shorter month and has the Thanksgiving holiday. Another factor was the first-time homebuyer tax credit, which had been set to expire at the end of November before it was extended into next spring.

"This clearly is a rush of first-time buyers not wanting to miss out on the tax credit," says Lawrence Yun, NAR chief economist. Spinning the news as always, he adds that "there are many more potential buyers who can enter the market in the months ahead."

Few buyers are purchasing new homes. Just 25,000 new homes were sold in November, down 8,000 from October's already anemic 33,000. "It looks like builders are having a real problem trying to compete with the depressed prices in the existing home market," says economist Joel Naroff of Naroff Economic Advisors.

All of this spells good news for mortgage shoppers. Few homeowners are refinancing, and even fewer people are buying homes. That means a lot of mortgage lenders have plenty of time to deliver personalized service.

If you're in the market for a mortgage or refinance, you can look for the best interest rate by searching Bankrate's rate tables.


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