Freddie Mac: 30-year mortgage rate cracks 5% barrier

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Inflation fears jolted the typical rate on a 30-year mortgage past 5% this week for the first time since last April, according to Freddie Mac’s weekly survey of lenders across the nation.

Freddie Mac, the giant home finance company, said lenders were on average offering 30-year home loans at 5.05% fixed to low-risk borrowers who paid 0.7% of the loan balance in upfront fees.

That was nearly a quarter-point higher than last week’s 4.81% . Last year at this time, the 30-year fixed rate mortgage averaged 4.97% in the Freddie Mac survey.

Nearly all fixed-rate loans are processed into mortgage bonds for sale to investors by Freddie Mac and its sister company Fannie Mae.

As the economic recovery strengthens, buyers of these and other fixed-income securities have begun to worry that a resurgence of inflation could cut into their earnings, and are demanding high yields by way of compensation. The concerns are emerging despite reassurance from Federal Reserve Chairman Ben Bernanke, who told Congress that inflation in the U.S. is at bay despite rising global food and oil prices.

Fixed home-loan rates tend to track the yield on the 10-year Treasury note, which rose above 3.6% this week after falling below 2.4% just four months ago.

The 15-year fixed-rate mortgage was being offered at 4.29% on average this week with 0.7% in upfront lender fees, Freddie Mac said, up from last week, when it averaged 4.08%. A year ago, the 15-year loan, favored by many home refinancers, averaged 4.34%.

Rates on 1-year adjustable mortgages and hybrid loans that become variable after five years at a fixed rate moved higher as well, Freddie Mac said.

The group’s chief economist, Frank Nothaft, said the positive economic news behind the move in rates included a 3.6% increase in non-farm productivity, the most since 2002; an unexpected drop in January’s unemployment rate from 9.4% to 9.0%; and service industry expansion at the fastest pace since August 2005.

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-- E. Scott Reckard

Image credit: Freddie Mac