Home-loan rates rise, to go higher

WASHINGTON - Rates on 30-year home loans rose this week and were poised to go higher as investors demanded higher rates for long-term government debt, which is closely tied to mortgage rates.

Mortgage giant Freddie Mac said yesterday that average rates on 30-year fixed-rate mortgages rose to 4.91 percent this week from 4.82 percent a week earlier. Rates in Freddie Mac's survey have been below 5 percent for more than two months. If they rise higher, that will diminish the appeal for refinancing for many borrowers.

The yield on the Treasury's 10-year note - a key benchmark for home mortgages and other kinds of loans - reached its highest level since November earlier this week.

The worry is that rising bond yields could drive mortgage rates higher and also increase the cost of borrowing for businesses. That could short-circuit the nation's efforts to emerge from a deep recession and the worst housing crisis in decades.

The federal government is being forced to greatly expand Treasury debt sales to cover a deficit that is projected to soar this year. So far, all that new debt had been sold at low interest rates as investors seek the safety of Treasury securities in uncertain times.

Mortgage rates "followed long-term bond yields higher this week as financial markets try to discern the state of the economy," Frank Nothaft, Freddie Mac's chief economist, said in a statement.

Freddie Mac collects mortgage rates from Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed-rate mortgage rose to 4.53 percent this week from 4.5 percent last week, according to Freddie Mac.

Even at the higher rates, qualifying for a loan is still tough. Lenders have tightened their standards dramatically over the last year, so the best rates are available only to those with solid credit.