Mortgage Rates Rise Despite Fed Cut

If you're still waiting to refinance that adjustable-rate mortgage, you may have blown it.

Mortgage rates rose over the past week from two-year lows, even as the Federal Reserve lowered short-term interest rates again, according to a survey by Freddie Mac(FRE - Cramer's Take - Stockpickr).

The average rate on benchmark 30-year, fixed-rate mortgages was 6.11% in the week ended Thursday, up 15 basis points from 5.96% the previous week.

A basis point is a hundredth of a percentage point.

That's bad news for anyone who was holding out on purchasing a new home -- or refinancing an existing loan -- in the hopes that mortgage rates would continue to fall after the Fed cut by a quarter-point Tuesday to 4.25%. (And based on the email I got in response to the story on Freddie's previous mortgage survey, some people definitely were.)

The fact is that fixed mortgage rates tend to move in line with yields on long-term Treasury bonds, not short-term rates. The benchmark for a 30-year mortgage is actually the 10-year Treasury, because after 10 years, the average borrower has sold his or her house or refinanced. And Treasury yields, which move in the opposite direction of their prices, crept up over the past week as people became a little less concerned about the economy and moved money out of bonds and back into stocks.

"November's employment report showed stronger job growth, no change in the unemployment rate and a jump in wages, suggesting to some market participants that the probability of an upcoming recession might be lower than originally thought," Frank Nothaft, Freddie Mac's vice president and chief economist, said in a press release.

"This led to a rise in interest rates for U.S. Treasury securities this week and mortgage rates followed."

That doesn't mean the housing market is about to turn around. Nothaft also notes that the percentage of borrowers with good credit and conventional 30-year mortgages who are more than three months behind on their payments rose to 1.31% in the third quarter from just 0.79% a year earlier. And the percentage of subprime loans that are even more behind on their payments rose to 11.38% from 6.78% over the same period. "So the housing segment of the economy still has a way to go before bottoming out."

Whether this dim outlook for the housing market eventually translates into more people buying Treasuries -- and pushing mortgage rates back down -- remains to be seen.

Meanwhile, the average rate on 15-year fixed-rate mortgages rose to 5.78% for the week ended Thursday from 5.65% the previous week. Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARMs, averaged 5.89% this week, up from 5.75% last week. And one-year Treasury-indexed ARMs averaged 5.50%, up from 5.46% last week.

Freddie's numbers are just averages. There are still some banks in some parts of the country that are quoting 30-year rates at 6%, or even a little lower. 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 my charging a "point" or fee based on the size of the loan.

Mortgage Rates in Selected Cities
City	Term	Rate
Boston	30-year fixed	6.125%
New York	30-year fixed	6.0%
Miami	30-year fixed	6.125%
Chicago	30-year fixed	5.875%
Minneapolis	30-year fixed	6.0%
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