30-Year Mortgage Rates Shoot Up to 5.20%

After months of remaining near 5%, mortgage rates have shot up over the past two weeks and are now at 5.20% according to BestCashCow/Informa data.

A perfect storm has come together to increase mortgage rates. Ten year Treasury notes, which help set fixed rate mortgages, rose above 4% for the first time in 18 months. At the same time, the Federal Reserve has ended its purchase of mortgage backed securities, taking an aggressive buyer out of the market.

We've speculated for some time about what would happen when the Fed program ends and we are now seeing some of the results. Most analysts expected a modest and gradual 25-50 basis point jump in rates once the progam ended. We've now seen a 25 basis point jump in the past two weeks.

What Does This Mean for Homebuyers?

If these trends hold, then it means that refinancing activity will slow. It will also put pressure on a real estate market that is slowly recovering.

I've been following actual rates, not just averages for a 30-year fixed rate loan in Massachusetts for the past four months. Until two weeks ago, a homebuyer could get a $200,000 loan at 0 points for 4.5%. That rate has now shot up to 5.125%.

Here's what the jump in rates means to your payments:

30 Year Mortgage:

Interest Rate 4.5%; monthly payment: $1,01.37

Interest Rate 5.125%; monthly payment: $1,088.97

The homebuyer in this example will now be paying an extra $87 per month because of the rise in rates.

Other Mortgage Rates

Other rates also moved up. The average 15-year fixed rate mortgage rose from 4.40% to 4.50%. The 5-year ARM rose from 3.99% to 4.03% and the ever volatile 1-year ARM moved from 4.64% to 4.83%.

View mortgage rates by state and zip code.