US rate on 30-year mortgages rises to 3.59 pct. - FOX 10 News | myfoxphoenix.com

US rate on 30-year mortgages rises to 3.59 pct.

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WASHINGTON (AP) -- Average rates on fixed mortgage rose for the third straight week, hitting their highest levels since mid-March. Still, mortgage rates remained close to historic lows, a trend that should help sustain the housing recovery.

Mortgage buyer Freddie Mac said Thursday that the average rate for the 30-year loan increased to 3.59 percent this week. That's up from 3.51 percent last week and above the rate of 3.31 percent reached in November, the lowest on records dating to 1971.

The average on the 15-year loan jumped to 2.77 percent. That's up from 2.69 percent last week. The record low of 2.56 percent was hit on May 2.

Cheaper mortgages are a key reason home sales have increased this year.

In April, sales of previously occupied homes rose at the fastest pace in three and a half years, the National Association of Realtors reported Wednesday. And sales of newly built homes jumped to the second-highest rate since July 2008.

More demand, along with a tight supply of homes for sale, has helped boost home prices. It has also encouraged builders to break ground on more homes.

Mortgage rates rose sharply this week because they tend to track the yield on the 10-year Treasury note.

The yield rose above 2 percent Wednesday for the first time since March 14 and was at 2.02 percent Thursday. Investors began selling government bonds Wednesday after minutes of the Federal Reserve's last meeting showed several policymakers favored slowing the Fed's bond purchases, perhaps as early as this summer.

The Fed is buying $85 billion a month in Treasury and mortgage bonds, which has pushed down long-term interest rates. Once it slows the bond purchases, interest rates are likely to tick up. That would decrease the value of bonds with lower yields.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for 30-year mortgages was unchanged at 0.7 point last week. The fee for 15-year loans also was steady at 0.7 point.

The average rate on a one-year adjustable-rate mortgage held at 2.55 percent. The fee for one-year adjustable-rate loans was unchanged at 0.4 point.

The average rate on a five-year adjustable-rate mortgage edged up to 2.63 percent from 2.62 percent. The fee was steady at 0.5.

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