Mortgage Rates Keep Rising

Mortgage rates kept rising on inflation concerns over the last week, despite the continued downturn of the housing market.

Freddie Mac's(FRE Quote) weekly mortgage survey found that 30-year fixed-mortgage rates climbed to the highest point in nearly nine months, averaging 6.42% with an upfront payment of 0.7 points. That rate is up from 6.32% a week ago, but still lower than the 6.69% rate a year earlier.

The 15-year fixed-mortgage rate reached 6.02% with an average upfront payment of 0.7 points, up from 5.93% a week ago. A year ago, those mortgages had a rate of 6.37%.

Fixed-rate mortgages haven't been this expensive since last fall.

Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARMs, averaged 5.89% with an upfront payment of 0.6 points. That rate is up from 5.7% a week earlier, but still lower than the year-ago level of 6.31%. One-year Treasury-indexed ARMs averaged 5.19% with the same upfront payment, up from 5.09% a week ago but lower than the 5.66% level a year earlier.

Frank Nothaft, Freddie Mac vice president and chief economist, attributed the higher rates to government reports showing higher inflation for consumers and producers. Nothaft noted that consumer prices posted the highest rise since November and that traders in the futures market started to "fully price in" a rise to the Federal Reserve's interest-rate target by the end of September.

The Fed started lowering its rate target last September to ease the credit crunch by lowering the cost of borrowing. However, those moves have also stoked inflation since the value of the dollar falls along with interest rates, making commodities and imports more expensive. Fed Chairman Ben Bernanke and other Fed governors have issued some tough talk on inflation recently, boosting expectations of a rate hike.

However, the housing market is still in a funk, with falling prices and less construction. Those who intended to purchase one of those cheaper homes may have missed the opportunity for the most competitive mortgage rates. Potential buyers may still find some bargains by using sites like BankingMyWay.com, which offers a tool to search for the best local mortgage rates.