Mortgage Rates Highest Since 2002

Rates on 30-year mortgages rose this week to the highest level since the spring of 2002.

Freddie Mac, the mortgage company, reported Thursday that rates on 30-year, fixed-rate mortgages increased to a nationwide average of 6.80 percent, up from 6.74 percent last week.

The increase pushed 30-year rates to the highest level since they stood at 6.81 percent the week of May 24, 2002.

The lowest mortgage rates in four decades powered a boom in housing which pushed sales of both new and existing homes to record levels for five consecutive years. But sales have slowed this year as mortgage rates have been rising.

For example, in San Diego, which led the California housing boom for the past decade, home values rose as much as 21 percent a year, reports CBS News correspondent Sandra Hughes. But last month, for the first time in a decade, the median home prices dropped by $5,000 between June 2005 and June 2006. New home and condominium prices during that same time dropped an average of $36,750.

Renee Phillips has felt the shift. Her San Diego condominium has been on the market for seven months.

"If I get an offer that's even close, I need to really seriously consider it," she told Hughes. "I'm not in a position to sit back and expect another one to come the next day."

In fact, some economists have expressed fears that the housing boom could quickly turn into a bust with sales and prices both falling sharply. But Federal Reserve Chairman Ben Bernanke told Congress on Thursday that so far the slowdown in housing "appears to be orderly."

Bernanke said the Fed recognized that a slowdown in housing could have a more severe impact on the overall economy "and we are watching it very carefully."

The rise in mortgage rates this week was blamed in part on further increases in inflation, including a 0.3 percent increase in core inflation as measured by the consumer price index, which was reported on Wednesday.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, increased to 6.41 percent, up from 6.37 percent last week.

Rates on one-year adjustable rate mortgages rose to 5.80 percent, up from 5.75 percent last week.

Rates on five-year adjustable-rate mortgages rose to 6.36 percent, up from 6.33 percent last week.

The mortgage rates do not include add-on fees known as points. The 30-year and five-year mortgages carried a nationwide average fee of 0.5 point. The 15-year mortgage had a nationwide average fee of 0.4 point and the one-year ARM carried a fee of 0.6 point.

A year ago, 30-year mortgages averaged 5.73 percent, 15-year mortgages stood at 5.32 percent, one-year ARMs were at 4.42 percent and five-year ARMs averaged 5.26 percent.