30-year fixed mortgage rate crosses 6 percent barrier

30-year fixed mortgage rate crosses 6 percent barrier

NEW YORK - The latest Freddie Mac survey of the US economy shows that the benchmark 30-year fixed mortgage rate has crossed the 6 percent barrier this week for the first time in the last six months. This seems a sure sign that the booming US housing market could be in for a slowdown in the next year.

The 30-year fixed mortgage rate for this week stood at 6.03 percent as against the 5.98 percent registered in the previous week. This figure is the first above the 6 percent mark since the 6.04 percent registered in the week ending March 31. Even the 10-year Treasury yield, which is a vital parameter in the mortgage market, hit a six-month high this week rising to 4.5 percent.

The average rate on the 15-year fixed-rate mortgages jumped to 5.62 percent from 5.54 percent that was registered in the previous week. This was considerably higher than the 5.14 percent at the same time last year. "The most likely pattern is for mortgage rates to gradually rise over time.

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It is likely that they'll hover at 6 percent or just a bit over," said Frank Nothaft, chief economist at Freddie Mac. He added that the rising fuel costs due to Hurricanes Katrina and Rita would peg the US economy back in the final quarter of 2005, but the massive reconstruction that needs to be undertaken would boost the economy in the first half of the next year.

"In spite of the job losses caused by hurricanes Katrina and Rita, the employment report was better than had been expected," said Nothaft. "This indicates that economic growth is likely to accelerate in 2006. That acceleration of growth, coupled with the specter of higher energy costs, will translate into higher long-term mortgage rates in the coming months."

Nothaft was of the opinion that it was unrealistic to expect house prices to keep on rising year after year. And the fact that mortgage rates are rising may be enough to keep investors away at least fro the time being, he said.