Could Rising Mortgage Rates Derail the Housing Recovery

In the latest survey on mortgage rates, Freddie Mac has reported rates are up across the board, driven by higher the rise in long term bond yields. Average rates for 30 year fixed-rate mortgages with an average 0.7 point, are at 5.29 percent for the week ending June 4, 2009 up from 4.91 percent. 

15 year fixed-rate mortgages averaged 4.79 percent this week with an average 0.7 point, up from last weeks average rate of 4.53 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.85 percent this week, with an average 0.6 point, up from last week when it averaged 4.82 percent. One-year Treasury-indexed ARMs averaged 4.81 percent this week with an average 0.6 point, up from last week when it averaged 4.69 percent.

Mortgage rates are the highest point since late last year but they are still low by historical standards. Rates would have to increase a lot more before derailing the housing market. The biggest drags on housing right now is the number of homes for sale and the rising unemployment rate.

The rise in mortgage rates has put a dent in the recent mortgage refinancing boom. Although another contribution factor for the drop-off in refinancing is the fact that almost everyone who has enough equity in their home and has good credit has probably already refinanced their mortgage.