Mortgage rates for 30-year fixed home loans rose for a second consecutive week, Freddie Mac said Thursday, threatening signs of stabilization in the housing market.
The average 30-year rate climbed to 5% for the week ended Thursday from 4.92% the previous week, Freddie said.
The 15-year rate increased to 4.43% from 4.37%, the McLean, Va., government-sponsored enterprise said.
Rising borrowing costs reduced mortgage applications last week. The Mortgage Bankers Association's index of applications to purchase a home or refinance fell 14% and home builders broke ground on fewer homes than expected in September. A government tax credit for first-time homebuyers is set to expire at the end of November.
"It's going to be a long road to recovery," said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Fla. "It's going to be pretty gradual."
The Federal Reserve set out last year to encourage lower mortgage rates by pledging to buy bonds backed by home loans. It increased the size of the program to $1.25 trillion in March.
The purchases of mortgage-backed securities guaranteed by Fannie Mae, Freddie and the Government National Mortgage Association brought down yields and allowed lenders to reduce rates on new loans while still selling the securities backed by them at a profit. The plan helped drive mortgage rates to a record low of 4.78% twice in April.
The central bank's purchasing program is scheduled to end in the first quarter of next year.