By Marcy Gordon
WASHINGTON -- U.S. mortgage rates fell for the first time in seven week, keeping the average on the 30-year fixed loan just under 4 percent. But rates are expected to surge next week, as markets respond to Chairman Ben Bernanke's comments that the Federal Reserve will likely reduce its bond purchases later this year.
Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan eased to 3.93 percent last week. That's down from 3.98 percent last week but is still the highest level since April 2012. The rate on the 15-year mortgage fell to 3.04 percent from 3.10 percent. That's the highest since May 2012.
Freddie Mac surveys lenders across the country on Monday through Wednesday each week. Bernanke's comments during a news conference Wednesday afternoon (at which Bernanke is pictured above) weren't fully reflected in the latest rates. Concern that the Fed will wind down its bond purchases has pushed mortgage rates higher in recent weeks. Mortgage rates are still low by historical standards, helping sustain the housing recovery that began last year. But a spike in long-term interest rates could drive them higher quickly.
The Fed has been buying $85 billion worth of Treasury and mortgage bonds a month since late last year. The purchases pushed long-term interest rates to historic lows, making mortgages and other consumer and business loans cheaper.
Mortgage rates are expected to rise because they tend to follow the yield on the 10-year Treasury note. The yield on the 10-year note climbed in early trading Thursday to 2.39 percent, its highest level in 15 months. That's up from a low of 1.63 percent last month.
And the yield could go even higher based on Bernanke's remarks that the Fed will begin tapering later this year and could end the program in the middle of next year, provided the economy shows continued strength.
The average mortgage rates do not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount. The average fee for 30-year mortgages rose to 0.8 point from 0.7 point. The fee for 15-year loans was unchanged at 0.7 point.
The average rate on a one-year adjustable-rate mortgage declined to 2.57 percent from 2.58 percent. The fee for one-year adjustable-rate loans was steady at 0.4 point. The average rate on a five-year adjustable-rate mortgage was unchanged at 2.79 percent. The fee slipped to 0.5 point from 0.6 point.
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By Marcy Gordon