April 4, 2008 in Business

Higher loan rates add to housing woes

Jeannine Aversa Associated Press
 

WASHINGTON – Rates on 30-year and 15-year mortgages rose this week, delivering another dose of unwelcome news to the troubled housing industry.

Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 5.88 percent for the week ending April 3. That was up from last week’s 5.85 percent and was the highest since the middle of March, when 30-year rates stood at 6.13 percent.

The increase in mortgage rates also isn’t welcome news to prospective home buyers in an environment where obtaining financing to buy a home or other big-ticket items has become more difficult.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, rose this week to 5.42 percent, up from 5.34 percent last week.

“Housing … continues to be a drag on the economy,” said Frank Nothaft, Freddie Mac’s chief economist.

However, rates on shorter term mortgages dipped this week

For five-year adjustable-rate mortgages, rates dropped to 5.59 percent this week, from 5.67 percent last week. And rates on one-year, adjustable-rate mortgages averaged 5.19 percent this week, down from 5.24 percent in the prior week.

The mortgage rates do not include add-on fees known as points. For 30-year and 15-year mortgages as well as one-year adjustable-rate mortgages the nationwide average fee was 0.5 point. Five-year mortgages carried a 0.6 point average fee.

A year ago, rates on 30-year mortgages stood at 6.17 percent, 15-year mortgage rates averaged 5.87 percent, five-year adjustable-rate mortgages were 5.92 percent and one-year adjustable-rate mortgages were at 5.44 percent.

Housing has been suffering through a severe slump that has dragged down house prices in many parts of the country. The fallout is afflicting both homeowners and the economy at large.

For the first time, Federal Reserve Chairman Ben Bernanke acknowledged Wednesday the possibility that the country could fall into recession, something that hasn’t happened since 2001. The economy is being clobbered by a trio of crises – housing, credit and financial. That’s taking its toll on the willingness of people to make big financial investments like buying a home.

Foreclosures, meanwhile, have swelled to record highs, aggravating housing’s problems by dumping more empty homes on an already depressed market.

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