Mortgage rates leap to 3-month peak

Mortgage brokers had bad news this week for loan shoppers who hadn't locked in their interest rates.

Mortgage rates for Nov. 17, 2010

The benchmark 30-year fixed-rate mortgage rose 16 basis points this week, to 4.62 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 0.37 discount and origination points. One year ago, the mortgage index was 5.05 percent; four weeks ago, it was 4.42 percent -- the lowest in more than 50 years.

The benchmark 15-year fixed-rate mortgage rose 18 basis points, to 4.02 percent. The benchmark 5/1 adjustable-rate mortgage rose 9 basis points, to 3.71 percent, and the 30-year, fixed-rate jumbo jumped 16 basis points, to 5.24 percent.

The last time the 30-year mortgage was higher than 4.62 was Aug. 18, when Bankrate's weekly survey found an average rate of 4.63 percent.


Weekly national mortgage survey

Results of's Nov. 17, 2010, 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:4.62%4.02%3.71%
Change from last week:+0.16+0.18+0.09
Monthly payment:$847.84$1,222.14$760.40
Change from last week:+$15.73+$14.84+$8.38
What would the monthly payment be for you? Use Bankrate's mortgage calculator to find out.

Unintended consequences

The rate increase caught brokers and borrowers by surprise, largely because the Federal Reserve's latest round of "quantitative easing" -- a technical term for purchases of Treasury notes -- was expected to maintain or ease rates, according to Michael Becker, a mortgage broker at Happy Mortgage in Lutherville, Md.

"A lot of people, including the Fed, thought that quantitative easing would help long-term rates either stay low or take them a little bit lower, and anything but that has happened," he says.

The good news -- if that adjective applies -- was that the mortgage rate increase wasn't as severe as a seemingly similar jump in May 2009. Nor was the jump as large as might have been expected, given the upward movement in rates on 10-year Treasuries and mortgage-backed securities, Becker says. Those trends suggest rates may still have room to move higher yet, however.

Applications drop

Borrowers who planned to refinance may find the higher rates a deterrent since the closing costs on a new loan might outweigh the payment savings, Becker says. Buyers whose comfort zone was too narrow to stomach this week's rate increase might want to rethink how much they can afford to spend.

Rates hop on 'up' escalator

The rise in rates is "your typical loan originator's nightmare," says Joe Metzler, a mortgage specialist at Mortgages Unlimited in St. Paul, Minn.

His advice for borrowers is to watch the overall trends, which he compares to a shopping mall's up-and-down escalators, rather than on daily rate fluctuations, which he likens to a mall shopper playing with a yo-yo.

"Which (escalator) is the market about to get on?" Metzler says. "I think we have gotten on the "up" escalator, we're going to the second floor, and once we get to the second floor, we'll hang there for a while."

The market is "pretty jittery," he adds, and that suggests rates may not bottom out again any time soon. The rate jump in May 2009 took several months to wear off.

"The people who've locked ... in the last 60 to 90 days, did good," Metzler says. "The people who've been waiting and holding out just got burnt, bad."


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