The average rate on a 30-year, fixed rate mortgage increased to 5.94 percent this week, up from 5.89 percent last week, mortgage giant Freddie Mac reported Thursday in its weekly nationwide survey of rates.
This week's rate was the highest since 30-year mortgages averaged 6.02 percent the week ending Dec. 5. It marked the fifth straight increase since 30-year rates hit a low for this year of 5.38 percent the week ending March 18.
Increasing signs that the economy's recovery is gaining momentum, including a good employment report for March, have pushed bond rates up, causing long-term mortgage rates to also rise. Bond rates are rising because traders expect the Federal Reserve to raise interest rates to head off inflation.
"Although this month's dramatic rise in mortgage rates is consistent with an economic recovery, it will take more than one month of strong employment gains to verify this recovery is sustainable," said Frank Nothaft, Freddie Mac's chief economist.
"The market is behaving as though the recovery is a fait accompli and has entered a volatile period of trying to outguess the Federal Reserve Board's next move," he said.
Fed Chairman Alan Greenspan told Congress on Wednesday that the recovery is solidly on track and that at some pointto keep inflation in check. But he didn't say when that might happen.
Some economists believe the Fed may push up short-term interest rates later this year. Others, however, don't believe higher rates will come until 2005.
Rates for 15-year, fixed-rate mortgages, a popular option for refinancing, rose this week to 5.25 percent, up from 5.23 percent last week. For one-year adjustable mortgages, rates were 3.69 percent this week, unchanged from the previous week.
The nationwide averages for mortgage rates do not include add-on fees known as points. The 30-year, 15-year and one-year all carried an average fee of 0.7 point this week.
This time last year, rates on 30-year mortgages averaged 5.79 percent, 15-year mortgages were 5.12 percent and one-year adjustable mortgages stood at 3.79 percent.
Rising mortgage rates may reflect the improving economy, but they could mean a slowdown in housing construction. It could also put pressure on the government-sponsored housing corporations Freddie Mac and Fannie Mae, because people are less likely to pay off their mortgages as early as expected.