Mortgage Rates Gain During Week

Mortgage rates continued to drift higher during the week, finishing the year at virtually the same level they started it.

The average rate on 30-year, fixed-rate mortgages rose 0.3 basis points to 6.17% over the week ended Thursday, according to a survey by Freddie Mac(FRE Quote).

A basis point is a hundredth of a percentage point.

The mortgages in this week's survey had average origination fees and discount points of 0.5% of the total loan amount, up from 0.4% the previous week.

At this time last year, rates on 30-year fixed-rate loans averaged 6.18%. They haven't spent the past 12 months at these levels, however. Mortgage rates track yields on long-term Treasuries, which are sensitive to concerns about the economy and inflation, among other things. Mortgage rates reached a high of 6.74% in June as investors worried that inflationary pressure would keep the Federal Reserve from cutting short-term rates to boost the housing market and the broader economy.

They started to drift down later in the year when it became clear the Fed had some room to ease monetary policy, reaching a low point of 5.96% in early December -- just before the central bank cut rates for the third time -- only to start moving back up as investors started to worry about inflation again.

Data released during the past week reinforced the view that the Fed may not have much more room to cut short-term rates. "Stronger consumer spending and an increase in the core price deflator in November caused long-term bond yields to inch up over the end of last week and beginning of this week, with mortgage rates following," Freddie Mac's chief economist, Frank Nothaft, said in a press release.

However, Nothaft said other economic data, including a decline in November's index of leading economic indicators and a weak manufacturing report in Philadelphia for December, tempered the rise in Treasury yields.

Treasury yields and mortgage rates rose despite data indicating that housing prices continued to decline in October for the 10th consecutive month. The price declines were widespread, occurring in 17 of the 20 metropolitan areas in the Standard & Poor's/Case-Shiller® 20-city composite.

Nothaft says falling house prices and tightened credit standards will likely slow consumer spending somewhat over the near term.

Other mortgage rates moved even less during the week. The average rate on 15-year fixed-rate mortgages was 5.79%, with average fees of 0.5%, unchanged on the week but down from 5.93% a year earlier.

Rates on five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARMs, averaged 5.90% this week, with average fees of 0.5%, also unchanged on the week. A year ago, the five-year ARM averaged 5.98%.

One-year Treasury-indexed ARMs averaged 5.53% this week with average fees of 0.7%, up from last week when it was 5.51%. At this time last year, the one-year ARM averaged 5.47%.

Freddie Mac surveys lenders about rates on conventional mortgages of less than $417,000 to borrowers with good credit. The survey doesn't reflect rates on jumbo loans of over $417,000 or loans to borrowers with weak credit.

Freddie Mac's numbers are averages. You can search for the best rates offered by lenders in your area on BankingMyWay.com. Just make sure you understand whether the lender is discounting the rate it quotes you by charging a "point," or fee, based on the size of the loan.

Mortgage Rates in Selected Cities
City	Term	Rate
Boston	30-year fixed	6.126%
New York	30-year fixed	6.158%
Miami	30-year fixed	6.162%
Chicago	30-year fixed	6.09%
San Francisco	30-year fixed	6.484%
Source: BankingMyWay.com --no origination fee / 20% down payment / excludes Internet banks / excludes credit unions / loans under $417,000 For more rates, see BankingMyWay.com