Home loan rates inch up

Mortgage rates have risen steadily in the past month, signaling a potential cool-down in the nation’s hot housing market, mortgage giant Freddie Mac reported yesterday.

The average 30-year fixed mortgage rate rose to 5.89 percent for a week that ended yesterday, the fourth-straight gain since March 18, when the rate was 5.38 percent, according to Freddie Mac, the nation’s second-largest buyer of mortgages.

This week’s average rate is the highest since Dec. 5, when it was 6.02 percent. Average one-year adjustable-rate mortgages and 15-year fixed-rate mortgages are also up, Freddie Mac reported.

Government reports this week that retail sales and consumer prices rose more than expected in March drove long-term-debt yields higher as investors bet on higher inflation and an increase in the Federal Reserve’s benchmark interest-rate target. Mortgage applications have fallen for four straight weeks, suggesting rising rates may be starting to discourage home buying and refinancing.

“The financial markets are beginning to think about the likelihood of inflation again,” said Frank Nothaft, Freddie Mac’s chief economist. “Jobs creation, retail sales and consumer prices jumped in March, which buoyed speculation that the Federal Reserve will raise rates sooner than expected.”

Another economist, Doug Duncan of the Mortgage Bankers Association industry trade group, has been more cautious in his forecasting, saying inflation is likely only if the economy experiences a few more months of solid growth in areas such as job creation and retail sales.

“One month doesn’t make a trend. We expect a slight decline in inflation. We might be wrong about that, but not in a quantum way,” Mr. Duncan said.

The one-year adjustable-rate mortgage rose this week to 3.69 percent from 3.65 percent on April 8, Freddie Mac reported. The one-year rate had reached 3.36 percent on March 26, the lowest in two decades of record keeping by Freddie Mac.

The 15-year fixed rate rose to 5.23 percent from 4.69 percent on March 18, according to Freddie Mac.

Housing accounts for 5 percent of the economy and helps fuel growth by spurring sales of home-related goods such as furniture and appliances. Refinancing has been a source of cash supporting consumer spending, which accounts for 70 percent of gross domestic product.

Lenders in the Washington area said yesterday they have experienced a slowdown in homeowners seeking to refinance, but the uptick in mortgage rates has prompted an increase in applications by people who are purchasing both newly constructed and existing homes.

“People see the rates go up a little bit and it encourages them to get off the fence,” said Russell Rothstein of Beacon Mortgage in Rockville. “Even if they aren’t the lowest rates in 40 years, they’re still the lowest rates in 30 years. It’s still a healthy market.”

However, Susann H. Haskins, president-elect of the Greater Capital Area Association of Realtors, said there are “not that many people on the fence. We’re in a market where there are five buyers for every house. If anything, this adds an extra layer of anxiety because people are wondering, ’When will I ever get a house and what will my interest rate be when I finally do get one?’ ”

An index of builder confidence rose this month to 69 from 64 in March, according to a survey the National Association of Home Builders released yesterday. Readings higher than 50 mean more builders view conditions as good than poor. The index was based on a survey of 201 home builders.

“Favorable interest rates and strong home-price appreciation definitely are still driving demand in today’s housing market, despite the recent bump-up in mortgage rates,” said NAHB President Bobby Rayburns.

• This article is based in part on wire service reports.