Freddie Mac said Thursday that the average rate on a 30-year fixed loan increased sharply from last week's rate. And it is well above the 4.17 percent rate hit a month ago -- the lowest level on records dating back to 1971.
The average rate on a 15-year fixed loan rose to 3.96 percent. Rates hit 3.57 percent last month -- the lowest level since 1991.
Rates are rising after plummeting for seven months. Investors are selling Treasury bonds in anticipation of an extension of tax cuts and unemployment benefits that could boost the economy next year. Investors are also dumping the bonds because they believe budget deficits will grow over the long term because of the deal. The sell-off is raising the yield on Treasury bonds. Mortgage rates tend to track those yields.
The increase in rates already is discouraging homeowners interested in refinancing their homes. Refinance activity fell for the fourth straight week last week, according to the Mortgage Bankers Association.
However, the increase in rates may have convinced some homebuyers who were waffling to go ahead and make a move. Purchase application volume was up for the third consecutive week and is at its highest point since the beginning of May. Mortgage brokers and real estate agents agree that a sustained rise in mortgage rates eventually will sideline potential buyers.
To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.
Rates on five-year adjustable-rate mortgages averaged 3.60 percent, up from 3.49 percent. The five-year hit 3.25 percent last month, the lowest rate on records dating back to January 2005.
Rates on one-year adjustable-rate home loans slipped to 3.27 percent from 3.25 percent.
The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount.
The average fee for 30-year and 15-year mortgages in Freddie Mac's survey was 0.7 point. It was 0.6 point for five-year and one-year mortgages.