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US 30-year mortgages hit 5.05%
NEW YORK—The average rate on the 30-year mortgage topped 5 per cent this week for the first time since April. Higher rates could further hamper the struggling housing market ahead of the spring’s prime home-buying season. Freddie Mac said yesterday that the average rate rose to 5.05 per cent from 4.81 per cent last week. It hit a 40-year low of 4.17 per cent in November. The average rate on the 15-year home loan, a popular refinance option, increased to 4.29 per cent from 4.08 per cent. It reached 3.57 per cent in November, the lowest level on records starting in 1991.
Rates are following the yields on the ten-year Treasury note, which are spiking on fears of higher inflation. Investors have been demanding higher Treasury yields since the Federal Reserve began its $600 billion bond-buying program to boost the economy. Record high foreclosures, job concerns and expectations that home prices will fall further have sidelined many potential homebuyers. Rising mortgage rates could deter more people from buying, although rates are still extremely low by historical standards.
The payment difference between today’s rate and the historically low rate in November on a $200,000 loan is less than $100 a month, not enough to price a buyer out of a market, said Greg McBride, a senior financial analyst with Bankrate.com. There also are plenty of buyers who are paying cash. Still, if rates continue to spike, that will chill any recovery in housing, said Patrick Newport, US economist at IHS Global Insight. “Six per cent would do serious damage if it happened in a very short period of time,” Newport said. (AP)
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