Mortgage Rates Rising

POMPTON PLAINS, NJ -- Mortgage rates are rising because of the troubles at the loan finance giants Fannie Mae and Freddie Mac, threatening to deal another blow to the faltering housing market, the New York Times reported.

Rates on conforming 30-year fixed-rate mortgages rose by nearly 0.40 percentage point in the past week to an average of 6.71 percent, according to HSH Associates in Pompton Plains, N.J. Rates on jumbo loans, which are too big to be eligible for purchase by Fannie Mae or Freddie Mac, currently average 7.84 percent, the Wall Street Journal reported.

Loan rates are rising because of concern in the financial markets about the future of Fannie Mae and Freddie Mac, which own or guarantee nearly half of the nation’s $12 trillion mortgage market, the Times reported. The federal government has proposed a rescue, and has urged Congress to approve it quickly.

But bond investors, worried that the companies may not be as big a support to the market as they have been, are driving up interest rates on securities backed by home loans, the Times reported. That added cost is being passed on to consumers through the mortgage markets. For a $400,000 loan, the increase in 30-year rates in the last few days would add $71 to a monthly bill, or $852 a year.

-- NYSSCPA.org News Staff

Posted on 7/23/08