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Mortgage Rates Reach 4-Month Peak

Average interest rates for 30-year fixed-rate mortgages were pegged at 5.14% in the last week of 2009, the highest it has been in four months, according to reports from mortgage servicer Freddie Mac.

Thirty-year fixed-rate mortgages, the most common type of “prime” mortgage, averaged 5.05% last week and even surpassed last year's rate of 5.1%. The figure has been on a steady rise in the later weeks of 2009, despite the low market activity.

Fifteen-year fixed-rate mortgages were also up in the same period, rising from 4.45% last week to 4.54% this week. However, the figure shows a moderate drop on a year-by-year basis, with last year's rates averaging 4.83%.

The same pattern was seen in 5-year Treasury-indexed adjustable-rate mortgages: a barely noticeable weekly rise from 4.40% to 4.44%, but a considerable year-by-year drop from a more promising 5.57% in 2008.

The only mortgage type to drop was the 1-year Treasury-indexed ARM, whose rate of 4.33% is lower than last week's 4.38% and last year's 4.85%. This is likely because of their association with the sub-prime loans which sparked the real estate market crash.

Freddie Mac chief economist Frank Nothaft says that despite the overall rise in mortgage rates, they are still low by historical standards. Today's rates, he says, are a mere one-third of the rates back in May 2000, which means banks are making 50% less in interest.

Nothaft added that nationwide, on the other hand, the real estate market is still showing signs of improvement. In October, home prices hit a five-month high and reached its highest average for 2009, with 11 out of 20 test cities showing positive growth.