WASHINGTON – Interest rates on fixed mortgages rose for a second week, staying slightly above historic lows.
Mortgage buyer Freddie Mac says the average rate on 30-year loans increased to 3.59%, from 3.55% last week. Two weeks ago, the rate fell to 3.49%, lowest since long-term mortgages began in the 1950s.
The average rate on the 15-year fixed mortgage, a popular refinancing option, rose to 2.84%. That's up from 2.83% last week and a record low of 2.80% the previous week.
Cheap mortgages have helped drive a modest housing recovery this year. Home sales are higher than last year, although they are still below healthy levels.
U.S. home prices are also rising. Prices for all homes, including distressed properties, jumped 2.5% in June from the same month in 2011, according to a report Tuesday by data analytics firm CoreLogic.
Builders have grown more confident after seeing increased demand for homes. In June, they increased their spending for a third month.
Low mortgage rates could provide some help to the economy if more people refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend each month. Many homeowners use the savings on renovations, furniture, appliances and other improvements, which help drive growth.
Still, the pace of home sales remains well below healthy levels. Many people are still having difficulty qualifying for home loans or can't afford larger down payments required by banks.
Mortgage rates are low because they tend to track the yield on the 10-year Treasury note. A weaker U.S. economy and uncertainty about how Europe will resolve its debt crisis have led investors to buy Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls, and vice versa.
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