Mortgage rates drop after five-week rise

Rates on fixed mortgages dipped after rising for five weeks in a row.

Still, they remain more than a half-point higher than last month and are at the highest level since late spring.

Freddie Mac said Thursday the average rate on a 30-year fixed mortgage slipped to 4.81 percent from 4.83 percent in the previous week. Last month, the rate reached a 40-year low of 4.17 percent, but has since been edging higher.

The average rate on the 15-year loan, a popular refinance option, also fell to 4.15 percent from 4.17 percent. It hit 3.57 percent in November, the lowest level on records starting in 1991.

Rates had been rising since early November as investors shifted money out of Treasurys and into stocks on expectations that the recent tax-cut plan will boost economic growth and potentially increase inflation. The sell-off comes even as the Federal Reserve buys up $600 billion in bonds to try to lower interest rates.

Yields tend to rise on fears of higher inflation. Mortgage rates track the yields on the 10-year Treasury note.

This week, Treasury yields stayed in a tight range due to thin trading before the Christmas holiday.

Higher mortgage rates have become another obstacle for the ailing housing market. The number of buyers looking to refinance fell for the sixth straight week, the Mortgage Bankers Association said Wednesday, while the ranks of people applying for a mortgage to buy a home slid 2.5 percent from the week before.

And while more buyers bought previously occupied homes and new homes in November than the previous month, the sales pace of both is far from what analysts consider healthy.

The National Association of Realtors said Wednesday sales of previously owned homes rose 5.6 percent to a seasonally adjusted annual rate of 4.68 million units last month. It's the third gain in four months following the worst summer for home sales in more than a decade.

The Commerce Department said Thursday that sales of new homes rose 5.5 percent last month to a seasonally adjusted annual rate of 290,000 units. But that increase came after sales had fallen to the second-lowest level in 47 years in October.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

The average rate on a five-year adjustable-rate mortgage fell to 3.75 percent from 3.77 percent. The five-year hit 3.25 percent last month, the lowest rate on records dating back to January 2005.

The average rate on one-year adjustable-rate home loans edged up to 3.40 percent from 3.35 percent.

The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount. The average fee for the 30-year, 15-year and 1-year loans in Freddie Mac's survey was 0.7 point. The average fee for the five-year ARM was 0.6 point.