WASHINGTON - The average rate on a 30-year mortgage has climbed above 6 percent for the first time since July, suggesting that housing sales may start to slow as borrowing costs rise.
Mortgage giant Freddie Mac, in its weekly survey of mortgage rates nationwide, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.01 percent for the week that ended March 24.
The rate was up from 5.95 percent the previous week and was the highest since the week that ended July 27, when rates averaged 6.08 percent. It marked the sixth week in a row that rates on 30-year mortgages rose.
A year ago, the rate was 5.40 percent.
Analysts said the pickup reflects concerns in financial markets about inflation. "Renewed concern over the threat of inflation pushed up long-term mortgage rates," said Frank Nothaft, Freddie Mac's chief economist.
Even with the recent increases, mortgage rates are still low by historical standards. "Although mortgage rates have risen these past six weeks, they still remain at very affordable levels," Nothaft said.
Fed policy-makers have raised the nation's benchmark bank lending rate seven times since June to stem inflation, setting the federal funds rate at 2.75 percent Tuesday. Mortgage rates have begun to rise in response, spurring new-home sales to the highest in four years in February as buyers raced to beat further increases, a government report released Thursday showed.
"When people see a rise like this in mortgage rates, it sort of kicks them in the behind and gets them going if they've been thinking about buying a house," said Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh. "The first half of the year looks quite strong for housing. The second half will be noticeably weaker" if mortgage rates continue to climb, he said.
New-home purchases rose 9.4 percent to a 1.226 million annual rate and the median price increased 9.6 percent, the biggest surge since February 1993, to $230,700, according to the Commerce Department.
"Housing appreciation has been really unbelievable," said James Coffrini, president of Sierra Pacific Mortgage Co. Still, "good job creation should keep the bubble from bursting in overheated local markets, like San Francisco, in which prices have gone up so fast."
The one-year adjustable mortgage rate rose to 4.24 percent from 4.20 percent a week earlier, Freddie Mac said. A year ago, the rate was 3.36 percent. The 15-year fixed rate rose to 5.56 percent from 5.47 percent. A year ago, the rate was 4.7 percent.
The 30-year fixed rate is up 44 basis points in six weeks. Since the start of 1980, 30-year fixed mortgage rates have averaged 9.61 percent. A basis point is 0.01 percentage point.
John Silvia, chief economist at Wachovia Corp., said people who can just afford a new starter home will be priced out of the market first as higher mortgage rates reduce how much they can borrow.
"The starter-home consumer and the small builder of 10 to 20 homes a year will feel the crunch first from higher mortgage rates," Silvia said.
