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December 20th, 2010

Mortgage rates rise: 30-yr fixed hits 5.09 percent

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Mortgage Rate Concept Mortgage rates increased last week to “better than five-month highs,” with certain expressions cracking the five percent mark for the first time in what feels like ages.

The latest issue of HSH.com’s “Market Trends Newsletter” explains the reasons behind this recent upswing in mortgage rates:

Fading fears of a double-dip recession, tax deals which may foster additional economic growth and a deflation threat which is falling behind us are all conspiring to push mortgage rates to better than five-month highs.

Even though mortgage rates at five percent are historically low and present an incredible deal for would-be borrowers, unfortunately, the prolonged period of rock-bottom rates has caused five percent mortgage rates to be dubbed “the refi killer”:

Already slowed in a usual holiday lull, refinancing activity has plummeted in the past few weeks. Even with the rise, there can be no doubt that interest rates remain both low and favorable. However, at a 5% level — one we’ve seen numerous times over the past year — there is virtually no pent-up demand for refinancing. As such, the 5% level is a refi-killer.

While mortgage rates did crest over the 5 percent mark last week, the weekly average did finish on a bit of a softer note (emphasis added):

HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages increased by twenty-three basis points higher (.23%), ending HSH.com’s national survey at 5.18%, the highest figure since the week ending June 4.

Important to perhaps the largest swath of the housing market, conforming 30-year FRMs have jumped to 4.93% for the week, but did close Thursday at 5.09% before settling back on Friday. FHA-backed offers, so crucial to first-time homebuyers and low-equity refinancers, have climbed to an average rate of 4.79%. The overall average rate for 5/1 Hybrid ARMs rose 15 basis points to 3.88% for the week. HSH.com’s FRMI includes rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public.

Given the still turbulent nature of the housing market, you may be concerned that five percent mortgage rates will spell the end of any positive trends housing has made recently.

Five percent 30-year fixed-rate mortgages shouldn’t be a housing market killer, though. Unlike refinancing, the decision to purchase a home has many other components than interest rate, and those other conditions remain the greater obstacle to improvement than any 5% interest rate might present.

CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Mortgage rates rise: The 5% problem.”

HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.

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One Response to “Mortgage rates rise: 30-yr fixed hits 5.09 percent”

  1. Tweets that mention Mortgage rates rise: 30-yr fixed hits 5.09 percent | HSH Financial News Blog -- Topsy.com Says: December 20th, 2010 at 12:11 pm

    [...] This post was mentioned on Twitter by HSH Associates. HSH Associates said: Mortgage rates rise: 30-yr fixed hits 5.09 percent: Mortgage rates increased last week to “better than five-mon… http://bit.ly/fHLhnF [...]

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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