Mortgage rates continued to soar this week, according to two major national surveys released Thursday.
Bankrate.com said the 30-year fixed-rate jumped 18 basis points to 8.17 percent while Freddie Mac reported it as 8.15 percent, an increase of about a quarter percent from their last survey. A basis point equals .01 percent.
The 15-year fixed-rate increased 18 basis points to 7.71 percent, according to bankrate. Freddie Mac reported the 15-year rate as 7.70 percent, up from 7.45 percent.
The 1-year adjustable rate moved up 7 basis points to 6.45 percent, said bankrate. Freddie Mac listed the ARM as 6.24 percent, increased from 6.09 percent.
The average monthly payment on a $100,000 30-year fixed-rate mortgage soared to $746, up $13 from last week. Payments on a $100,000 15-year loan were up to $939, an increase of $10.
The last time the 30-year fixed-rate topped 8 percent was May 1997. The biggest swing the 30-year took in the '90s was an increase of about two percent in one year. It began in January 1994 when it was 7.07 percent and ended when the rate went up to 9.20 percent in December, according to Freddie Mac.
"A quarter of a percent is a pretty big move in one week," said Robert Van Order, chief economist at Freddie Mac. "Rates seem to be leveling off a little bit in the bond market, so it may be that next week it'll be down a little bit, but I still think it'll be around 8 (percent)."
Investors continue their wait-and-see attitude as they try to interpret the Federal Reserve's ongoing scrutiny of inflation data. New numbers from the Consumer Price Index are expected Aug. 17 and the Fed may move to raise interest rates at their meeting on Aug. 24.
"The market is more volatile than usual now," said Van Order. "The news about inflation and the Fed moves are sort of in conflict. On one hand, the economy is strong and has been stronger longer than people thought. On the other hand, we really haven't seen inflation change much. It's still running around two percent.... (Mortgage rates) could go either way."
In the meantime, prospective homebuyers shouldn't wait, he said. It's a hard lesson for those who have postponed a purchase already and are now kicking themselves for not locking in a rate sooner.
"If we have a couple of months of really strong employment reports, rates will go up again. So I don't think it's prudent to stop searching for a house and hope that rates fall. They might, but I think it may be wiser to continue the search and if you find a house, lock in a rate."
The refinancing market has slowed, and those people who have refinanced will be reluctant to give up their low rates to trade up. The effect on home sales is inevitable, but not necessarily bad news, said Van Order.
"The first half of this year was even stronger than last year, and last year was the third record year in a row," he said.
"So I think we'll see sales decline some, bu they still won't be bad and we still aren't seeing as yet, for instance, a decline in mortgage applications for purchase. Those still seem to be strong, so in the very short run it doesn't look like sales are going to change by much. But by the end of the year, though, I think they'll be lower."
Since ARMs offer lower introductory rates, they are now a growing part of the mortgage market.
"The start rates are running about a couple percentage points below the 30-year rate and there may be some even better deals than that," said Van Order.
"Those are riskier, but I think we'll see some increase in the market share. Indeed we already have. The ARM share is probably around 20 percent of the market now. It was a little over 10 (percent) last year, and we'll probably see that go up a little bit by the end of the year."
Another sector that could take off as an alternative is balloon mortgages - shorter-term loans that feature huge payments at the end of the term. While they only comprise a small part of the market, Van Order says balloons are particularly attractive for those planning to trade up in 5 to 7 years: "They'll get a lower rate, and if they're only going to be in the house for a relatively short period of time, they're really not taking on any risk."
The bankrate.com National Index is based on a Wednesday survey of the 50 largest banks and the 50 largest thrifts in the 10 largest metropolitan areas in the country. These are averages.
Written by Kristen Gerencher, personal finance reporter for CBS MarketWatch