Mortgage Rates and Foreclosures Soar Higher

McLEAN, Va. – Mortgage rates had their largest spike in nearly four years, and the 30-year fixed-rate reached its highest level in almost a year, Freddie Mac said yesterday. Meantime, the Mortgage Bankers Association reported that a record number of homeowners entered foreclosure during the first quarter of 2007, breaking the previous record set in late 2006 and reflecting continued stress on the jittery housing market. The average rate on 30-year fixed-rate loans climbed to 6.74% this week, from 6.53% last week, marking the biggest one-week increase since July 2003. The average for 15-year, fixed-rate loans climbed to 6.43%, from 6.22% last week. ARM rates also rose sharply, with the average for the five-year ARM increasing to 6.37% this week, from 6.24% last week; and the average for the one-year ARM climbing to 5.75%, from 5.65%. Frank Nothaft, chief economist for Freddie Mac, attributed the spike in rates to inflation pressures and economic strength, that have boosted Treasury yields recently, as well as mortgage rates. Meantime, the MBA said the cooling of the mortgage market is causing investors to walk away from unprofitable investments. The first-quarter's increase in new foreclosures was mostly driven by problems in California, Florida, Nevada and Arizona, where foreclosures are being heavily influenced by speculators who are walking away from properties now that home prices have started to fall in areas of those states and they face resets in the adjustable-rate mortgages they took out for these homes, the MBA said. But Ohio, Indiana and Michigan are the hardest hit states, accounting for 20% of all foreclosures in the country, although they have just 8.7% of all mortgage loans.