BUSINESS

Average US rate on 30-year mortgage up to 3.87 pct.; 15-year at 3.11; highest levels this year

05/28/2015 12:21 EDT | Updated 05/28/2016 05:59 EDT
WASHINGTON - Average long-term U.S. mortgage rates rose this week to their highest level so far this year as new data showed strength in the housing market.

Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage increased to 3.87 per cent from 3.84 per cent a week earlier. The rate on 15-year fixed-rate mortgages advanced to 3.11 per cent from 3.05 per cent.

Rates have risen in recent weeks amid signs of improvement in the economy.

A government report issued Tuesday showed that more Americans bought new homes in April, evidence that the stronger job market is propelling the housing market. New-home sales climbed 6.8 per cent last month to a seasonally adjusted annual rate of 517,000.

Rising demand has created a supply crunch, and the limited inventory of homes for sale has pushed up prices.

Home prices rose at a steady pace in March, according to the latest Standard & Poor's/Case-Shiller 20-city home price index showing a 5 per cent increase in March from 12 months earlier. Prices rose at the same pace in February.

Home values are rising at a faster rate than incomes, potentially pricing many would-be buyers out of the market.

Still, Americans signed contracts to buy homes in April at the fastest pace in nearly nine years. The report Thursday by the National Association of Realtors showed the fourth straight monthly gain in pending home sales. Signed contracts are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.

Despite their recent climb, mortgage rates remain low by historic standards. A year ago, the average 30-year rate was 4.12 per cent and the 15-year was 3.21 per cent.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 per cent of the loan amount.

The average fee for a 30-year mortgage fell to 0.6 point this week from 0.7 point last week. The fee for a 15-year loan slipped to 0.5 point from 0.6 per cent.

The average rate on five-year adjustable-rate mortgages rose to 2.90 per cent from 2.88 per cent; the fee remained at 0.5 point. The rate on one-year ARMs averaged 2.50 per cent, down from 2.51 per cent last week; the fee declined to 0.3 point from 0.4 point.