Mortgage rates rise, could stall recovery

U.S. mortgage rates rose in December to the highest level since August, raising the prospect that the budding housing recovery will stall as home buying becomes more costly.

The rate for 30-year fixed home loans rose to 5.14 percent for the week ended yesterday from 5.05 percent, mortgage finance company Freddie Mac said. That's the fourth consecutive weekly increase.

"If you start to see rates heading toward 6 percent, that will create some political attention," said Donald J. Rissmiller, chief economist at Strategas Research Partners in New York.

The important thing to watch is what happens to rates in the period after the holidays, which is usually a slow time for housing sales and refinancing, he added.

Rising mortgage rates may hamper the nation's economy and housing market as it becomes more expensive for consumers to buy homes or refinance existing loans. A Federal Reserve program to purchase as much as $1.25 trillion in securities backed by home loans helped reduce mortgage rates this year. The program is scheduled to end in the first quarter of 2010.

The average rate on a 15-year fixed mortgage rose to 4.54 percent from 4.45 percent. Rates on five-year, adjustable-rate mortgages averaged 4.44 percent, up from 4.40 percent. However, rates on one-year, adjustable-rate mortgages fell to 4.33 percent from 4.38 percent.

- Combined news services