Year of Ultra-Low Rates Ends on a 7-Month High

While mortgage rates for 2010 on the whole averaged some of the lowest on record, average mortgage rates for the week rose to end the year on an uptick. Mortgage rates for the 30-year fixed mortgage are now at their highest level in seven months.

The interest rate on the 30-year fixed mortgage averaged 4.86 percent in the week ending December 30, up from 4.81 percent last week, according to the Primary Mortgage Market Survey put out weekly by Freddie Mac, a buyer of residential mortgages. A year ago, the 30-year fixed mortgage averaged 5.14 percent.

The 15-year fixed mortgage averaged 4.2 percent, up from last week's average of 4.15 percent. A year ago at this time, this mortgage averaged 4.54 percent.

Frank Nothaft, chief economist at Freddie Mac, stated, “For the year as a whole, 30-year fixed mortgage rates averaged just below 4.7 percent, which represented the lowest annual average since 1955, when the average price of a home was $22,000.”

Nothaft attributed the rise in mortgage rates to concerns that economic growth may lead to inflation. Those concerns caused an increase in bond yields, which typically brings mortgage rates along.

Speculation that low rates will soon be a thing of the past could encourage refinancers and homebuyers to act before mortgage rates climb any higher. However, according to the mortgage applications survey put out by Mortgage Bankers Association (MBA),  applications for refinance fell for the sixth straight week for the week ending Dec. 17. The dip in refinance applications paired with a recent drop in home purchasing is causing some to fear higher rates will slow an already stagnant housing market.

Refinancing continues to dominate the mortgage market, with over 72.3 percent of mortgage applications made for the purpose of refinancing, according to the MBA.

(The rates reported by Freddie Mac require payment of an average 0.8 point. A point is 1% of the mortgage amount, charged as prepaid interest.)

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