Mortgage rates rise, topping 6%

Freddie Mac says that rates on 30 year fixed mortgages are up on growing concerns about inflation.

Last Updated: May 29, 2008: 12:26 PM EDT

(CNNMoney.com) -- Rates on 30-year mortgages were pushed up this week above 6 percent amid growing concerns about inflation, mortgage backer Freddie Mac said Thursday.

Freddie Mac said 30-year fixed-rate mortgages averaged 6.08% with an average of 0.6 points, up from 5.98% last week. Last year at this time, the 30-year loan averaged 6.42%.

"Mortgage rates drifted up this week over market concerns that the Federal Reserve Board may raise short-term rates later this year," said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement.

"Indeed," Nothaft added, "market inflation expectations increased over the last few weeks and the federal funds futures market now has a 25 basis point rate hike priced in by the end of the year."

Rising prices
Fanning the concerns about inflation are skyrocketing food and energy prices. On Thursday the average price for a gallon of gas passed $4 per gallon in 11 states, while oil prices rebounded to about $130 a barrel as supplies fell sharply. Also on Thursday, a report from the Labor Department showed that new applications for unemployment insurance rose last week.

And the housing market continues to deteriorate. A report on Tuesday showed that US home prices fell 14.1% in the first quarter, the sharpest decline in 20 years. Additionally, a Census Bureau report out this week found that new home sales remain near a 17-year low.

Rates on five-year adjustable-rate mortgages (ARMs) averaged 5.62 percent this week, with an average 0.5 point, up slightly from last week when it averaged 5.61 percent. A year ago, the 5-year ARM averaged 6.19 percent.

The rate for one-year ARMs averaged 5.22 percent this week with an average 0.6 point, down slightly from last week when it was 5.24 percent. At this time last year, the 1-year ARM averaged 5.57 percent.