Fixed mortgage rates edge higher; key variable rate drops

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Fixed interest rates on home loans edged higher for the second straight week after scraping bottom earlier this month, but a popular type of adjustable rate was slightly lower, Freddie Mac said in its latest report.

Lenders in the survey were offering 30-year loans to well-qualified borrowers at an average fixed rate of 4.23% early this week with 0.8% of the balance paid in upfront fees, compared with 4.21% a week earlier. The rate on a 15-year fixed mortgage averaged 3.66% with 0.7% in fees, compared with 3.64% in the previous survey, Freddie Mac reported Thursday.

The lowest fixed rates ever recorded in the Freddie Mac survey occurred two weeks ago, as seen in this chart tracking the findings.

Borrowers who know they won’t stay in their homes longer than five years sometimes consider ‘hybrid’ adjustable rate mortgages that have a fixed rate for the first five years before becoming variable for the remaining 25 years.

Freddie Mac said the rate on a popular version of that loan averaged 3.41% this week, with an average 0.6% in lender fees, down from last week when it averaged 3.45%. That was the lowest rate since the big mortgage finance company began tracking five-year hybrid ARMs in 2005.

Freddie Mac asks lenders what terms they are offering to borrowers with good credit, enough income to comfortably make payments, and 20% down payments (or equivalent home equity if they are refinancing).

Borrowers can pay additional amounts known as discount points to lower their interest rates, and generally must also pay for third-party services such as appraisals and title insurance -- costs that do not show up in the Freddie Mac survey.

Mortgage professionals say solid borrowers who shop around often find rates lower than those quoted by Freddie Mac.

Ed Ferrara, whose FreeRateUpdate.com website tracks rates available through mortgage brokers, said 30-year loans had edged higher but were still available at an even 4% Thursday morning to well-qualified borrowers who pay 1% of the loan balance upfront. He said that the going rate on the 15-year fixed loan was 3.5% to such borrowers.

-- E. Scott Reckard