Average mortgage rate leaps to 4.46 percent, highest since 2011

Los Angeles TimesJune 28, 2013 

A huge surge in mortgage rates, which according to Freddie Mac has lifted the benchmark 30-year loan to 4.46 percent, is the biggest weekly increase since the financial crisis set in, rate watchers say.

Freddie Mac's weekly survey, out Thursday morning, showed the average rate for a 30-year fixed loan jumping from 3.93 percent last week. The 4.46 percent reading was the first to exceed the 4 percent mark since the week of March 22, 2012, and the highest since the week of July 28, 2011. The average 15-year rate climbed to 3.5 percent from 3.04 percent, according to Freddie Mac, which polls lenders early each week about the terms they are offering to solid borrowers with 20 percent down payments.

The increase was triggered by expectations that the Federal Reserve would scale back its massive stimulus program, which involves buying $85 billion worth of Treasury notes and mortgage-backed securities per month.

Higher rates could restrain the heavy demand for housing that, according to the S&P/Case-Shiller survey, drove home prices in 20 U.S. cities up 12 percent in April, the biggest year-over-year gain in more than seven years.

That might not be such a bad thing, according to observers such as real estate consultant John Burns of Irvine, Calif. Housing markets have begun to look overheated, he said, raising the prospect that another boom-and-bust cycle might be in the making. "When home prices start rising 2 percent per month, which they have been in (Los Angeles), it becomes like a runaway train that you cannot stop," Burns said. "Rising rates should cool the rate of price appreciation."

Bankrate.com, which also monitors mortgage rates, said its survey showed the typical 30-year mortgage rate jumping from an average of 4.12 percent last week to 4.61 percent this week.

It was the biggest one-week increase since Lehman Bros., the big Wall Street firm, collapsed in 2008, ushering in the financial crisis, said Bankrate senior financial analyst Greg McBride. The latest increase was "clearly an overreaction," McBride said -- but one that "shows how addicted to stimulus the markets are."

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