Investors’ Inflation Fears Push Florida Home Loan Rates Higher Still

With investors continued to express concerns over inflation, Florida home loan borrowing costs increased for the third consecutive week, with the benchmark 30-year, fixed-rate mortgage coming in at an average of 6.78 percent, up from 6.71 percent last week.

It was the highest level for the 30-year mortgages since they averaged 6.81 percent the week of May 24, 2002, Freddie Mac said.

While the housing market has enjoyed five boom years powered by the lowest rates in four decades, housing sales are expected to decline by 7 percent or more this year as increasing home loan rates make ownership more costly.

“Financial markets continue to expect more rate hikes by the Fed over the next six months, which has added upward pressure on mortgage rates,” said Freddie Mac chief economist Frank Nothaft. “With higher interest rates, the housing market has begun a gradual and orderly reversion towards historical norms. New construction, home sales and house price appreciation have all been slowing over the past few months.”

Rates have been on the rise since Federal Reserve Chairman Ben Bernanke expressed his concerns earlier in June that inflation was rising at “unwelcome” levels, raising worries about how many more interest rate hikes there will be before the Fed determines that it has done enough to combat inflation.

A variety of popular mortgage options experienced rate increases this week, in addition to the fixed-rate, 30-year home loan.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a Florida home loan, increased to an average of 6.43 percent, up from 6.36 percent a week ago. Meanwhile, one-year adjustable-rate mortgages (ARMs) rose to 5.82 percent, up from 5.75 percent last week and the highest average seen by the market in more than five years.

Five-year adjustable-rate mortgage rates climbed to 6.39 percent, up from 6.32 percent last week. The rates reported in the Freddie Mac survey do not include origination fees or points. The one-year ARM carried an average fee of 0.8 point, while the other three mortgage categories each averaged 0.5 points.

A year ago, at the peak of the housing boom, 30-year mortgages averaged 5.62 percent, 15-year mortgages 5.20 percent, one-year adjustable-rate loans 4.33 percent and five-year ARMs averaged 5.19 percent. Analysts expect the continued steady rise of rates until inflation concerns subside, but do not think Florida home loans will eclipse 7 percent by year’s end.