Mortgage rates rise on worries about Fed

WASHINGTON — Mortgage rates rose again this week on worries about what the Federal Reserve will do next. One-year adjustable rate mortgages hit the highest level in nearly five years.

Freddie Mac, the mortgage company, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.67 percent, up from 6.62 percent last week.

This week’s rate was the highest since the week ending June 13, 2002, when 30-year mortgages were at 6.71 percent.

Rates on one-year adjustable rate mortgages were also up for the week, rising to 5.68 percent. That was the highest point for one-year ARMs since they averaged 5.71 percent in mid-August 2001. Last week, the one-year ARM was at 5.61 percent.

The housing sector, which has enjoyed five boom years, is exhibiting numerous signs of slowing under the impact of rising mortgage rates.

The latest such evidence came Thursday with a report from the government that residential construction spending dropped by 1.1 percent in April, the biggest drop in more than two years. And a report from the National Association of Realtors showed that its index for pending home sales fell for a third straight month.

Analysts believe housing will experience a gradual slowing this year, but not a crash as long as the Federal Reserve calls a halt soon to its two-year campaign to push interest rates higher to keep inflation under control.

However, financial markets are worried that the Fed, which has already boosted interest rates 16 times, may keep raising rates rather than pausing as had been hoped in response to signs of growing inflation pressures.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a home mortgage, rose this week to 6.26 percent, up from 6.23 percent last week.

Rates on five-year adjustable-rate mortgages also rose, climbing to 6.26 percent, compared with 6.21 percent last week.