Mortgage Rates Rise to Seven-Month High

Average interest rates on U.S. 30-year mortgages rose in the latest week to their highest since late October 2006, according to a weekly survey released by finance company Freddie Mac.

Thirty-year mortgages averaged 6.37%, up from 6.21% a week earlier and the highest since they averaged 6.40% in the week ended October 26, 2006.

Fifteen-year mortgage rates averaged 6.06%, the first time above 6% since mid-February. Last week they averaged 5.92%.

One-year adjustable rate mortgages (ARM) averaged 5.64%, up from 5.48% a week earlier.

A year ago, 30-year mortgages averaged 6.62%, 15-year mortgages 6.23% and the one-year ARM 5.61%.

"Stronger than expected consumer confidence and recent comments from members of the Federal Reserve raised some inflation concerns in the market, causing it to lower expectations of a Fed rate cut this year. This helped push mortgage rates higher this week," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

"We expect a gradual rise in mortgage rates over the remainder of the year with sales slipping further in the second half of the year. A gradual recovery returns toward the end of 2007 with modest increases in sales and construction during 2008," Nothaft said.

In a sign that the housing market may be recovering sooner than anticipated, the Commerce Department earlier on Thursday said U.S. single-family home sales for April surged 16.2% to an annualized rate of 981,000 units. The increase was the largest since a 16.4% jump in April 1993.

On Friday, the National Association of Realtors will release U.S. April existing home sales data.

Freddie Mac said lenders charged an average of 0.4% in fees and points on 30- and 15-year mortgages, both unchanged from last week. Fees on the one-year ARM averaged 0.6%, down from 0.7%.

The "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaged 6.02%, up from 5.92% last week. Fees and points charged on the hybrid mortgage averaged 0.5%, unchanged from last week.

Freddie Mac is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio.

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