Monday, May 08, 2006

30-Year Mortgage Rates Near 4-Year High

Mortgage rates rose for the sixth consecutive week, with interest on 30-year fixed mortgages averaging 6.59 percent for the week ended May 4, according to Freddie Mac.

Mortgage rates were significantly lower a year ago at 5.75 percent. More increases could be on the way, says Freddie Mac chief economist Frank Nothaft, who expects the upward movement in borrowing costs to slow housing sales by 5 percent this year as increases in the federal-funds rate push bank prime rates higher — which would result in higher payments for consumers who hold variable-rate mortgages or home equity loans.

Chris Thornberg, senior economist for the UCLA Anderson Forecast, downplays the impact of interest rates, noting that rates eventually had to rise as a result of tightening by the Federal Reserve.

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