Mortgage rates took a big jump this week, to their highest point in a year. There’s no single explanation for the rise.

The benchmark 30-year fixed-rate mortgage rose 35 basis points, to 6.77 percent, according to the Bankrate.com 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 almost the same, at 6.75 percent. Four weeks ago, it was 6.62 percent.

The benchmark 15-year fixed-rate mortgage rose 37 basis points, to 6.32 percent. The benchmark 5/1 adjustable-rate mortgage rose 43 basis points, to 6.48 percent. The 30-year fixed jumbo, for big mortgages, rose 4 basis points, to 7.68 percent.

The last time the 30-year fixed was higher was the week of July 18, 2007, when it was 6.82 percent. Six weeks after that, the 30-year fixed was below 6.5 percent. Circumstances are different now, and there’s no guarantee that we’ll see a repeat of an August rate swoon.

Weekly national mortgage survey

Results of Bankrate.com’s July 23, 2008, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

  30-year fixed 15-year fixed 5-year ARM
This week’s rate: 6.77% 6.32% 6.48%
Change from last week: +0.35 +0.37 +0.43
Monthly payment: $1,072.38 $1.421.05 $1,040.74
Change from last week: +$38.13 +$33.14 +$46.17

Many forces at work

Mortgage rates are being pushed and pulled by various forces: increasing inflation, tighter lending guidelines all around, a loss of confidence in Fannie Mae and Freddie Mac, and an upcoming general election that makes politicians want to take some kind of action.

The Consumer Price Index went up 1.1 percent in June, the Bureau of Labor Statistics reported last week. Core prices, excluding food and energy, rose 0.3 percent. Both rates were higher than most investors and economists had expected.

Michael Moskowitz, president of New York-based mortgage lender Equity Now, pronounces inflation to be one of the main culprits for this quick rise in rates. He believes that government policy is putting upward pressure on rates, too, by restricting lending. Last week, the Federal Reserve issued new mortgage regulations that, among other things, require lenders to verify borrowers’ ability to repay. In practice, this means that borrowers will have to document their incomes and assets.

The regulation infuriates Moskowitz, who emigrated from the Soviet Union when he was 15 and adores the capitalist system because he grew up in its opposite. He’s all for regulations that protect borrowers from being taken advantage of. But the Fed’s new rule is too broad, he says: “I basically feel that government policies are restricting lending.”

He asks: What of a marginally creditworthy buyer who makes a $700,000 down payment on a $1 million home and wants to borrow $300,000, without stating or documenting his income? That buyer will find it difficult or impossible to get a mortgage at a reasonable rate. “Let the guy who lives in the million-dollar house borrow $300,000,” Moskowitz says. “How does it serve the public good by not allowing him to borrow anything?”

Fannie-Freddie scare

In addition to more strict regulations, the mortgage world was buffeted in the last week by what Moskowitz’s underwriting manager, Matt Hackett, calls ” the Fannie-Freddie scare.”

Fannie Mae and Freddie Mac are government-sponsored enterprises that securitize, guarantee and buy mortgages. Their job is to make sure that mortgage lenders have money to lend to creditworthy borrowers. But concerns about their financial stability led investors to wonder if they could continue to perform their mission.

Enter the federal government. Treasury Secretary Henry Paulson announced that the government would offer cheap credit to Fannie and Freddie if they needed it in a pinch. So far, they haven’t gone to Uncle Sam for a loan. But Fannie’s and Freddie’s troubles put upward pressure on rates.

“Even if there is a U.S. government bailout, there’s going to be additional constraints put on Fannie and Freddie in terms of how much they can actually lend,” says Cameron Findlay, chief economist for LendingTree.com. “That was going to constrain the market. Anytime you tighten that noose, it will increase the cost of borrowing.”

Findlay predicts that “it will actually help rates” now that Congress and the White House are in general agreement about a housing bill that would create a stronger regulator for Fannie and Freddie, among other things.