Home Mortgage Rates Rebound From Record Low

U.S. home loan rates climbed this week from record lows as the bond yields used to peg borrowing costs jumped to their highest levels in more than a month.

Average 30-year fixed mortgage rates rose to 5.12 percent in the week ending Jan. 22 from last week's 4.96 percent, the lowest rate since home funding company Freddie Mac began tracking them nearly forty years ago.

"Fixed-rate mortgages followed bond yields and edged up this holiday week," Frank Nothaft, Freddie Mac's chief economist, said in a statement. Financial institutions were shut on Monday for the Martin Luther King Jr. holiday.

Still, the rate in the first three weeks of this year averaged a quarter percentage point below the average for December 2008, according to Freddie Mac, stoking demand for refinancing.

The Mortgage Bankers Association released data on Thursday showing a similar upward trend in interest rates for the week ending last Friday.

Average 30-year fixed mortgage rates leaped 0.35 percentage point in the week ended Jan. 16 to 5.24 percent. In the preceding week, the 30-yer rate touched the lowest level in the history of the trade group's survey, which dates to 1990.

The MBA added that requests for refinancing loans represented more than 83 percent of all mortgage applications in the past week, just below the record high set the prior week.

However, the beleaguered housing industry is counting on mortgage rates to stay low for a sustained period to encourage qualified buyers to return to the market.

Rates have fallen more than a percentage point from two months ago on new sweeping government actions aimed at cutting borrowing costs to rejuvenate the worst housing markets since the Great Depression.

Key to this effort is the Federal Reserve's commitment to buy up to $500 billion of mortgage bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae, and up to $100 billion of notes issued by Fannie, Freddie and the Federal Home Loan Bank System.

The Fed has reported purchases of more than $56 billion of these securities since early December.

But the highest U.S. unemployment in 16 years and ongoing home price declines are paralyzing many potential buyers.

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While home owners are rushing to cut costs by refinancing—if they can get their applications approved by more rigid lenders—applications to buy homes are hovering near eight-year lows, according to MBA data.

A day after the U.S. home builders trade group reported a record low for its sentiment index, the Commerce Department said housing starts and permits to build homes sank to all-time lows in December.

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