Mortgage rates head up, up, up

Mortgage rates hit their highest point in almost four years this week, a move that is expected to slow home sales even more.

The average rate on a 30-year, fixed home loan reached 6.53 percent, mortgage firm Freddie Mac reported. That is up from 6.49 percent last week.

Market watchers say the climbing isn't over.

"Rates are likely to reach 7 percent this year, and that will likely put a brake on real estate in Arizona," said Terry Turk, president of Mesa-based Sun American Mortgage Co.

A 50 percent rise in home prices in 2005 means many buyers need low rates to afford a house.

In September, when the median price of a used Valley home hit $263,000, the average 30-year mortgage rate was 5.77 percent. Financing the full amount meant a monthly payment of $1,535.

The median price still is $263,000. But at today's higher mortgage rate, the monthly payment on the same loan is $1,663.

Yields on 10-year Treasury notes, which directly affect mortgage rates, have been steadily climbing for four weeks as Wall Street worries about inflation creeping up.

This week's 30-year mortgage rate was the highest since July 2002, when it was 6.54 percent. But it is still low by historic standards. In 1981, 30-year rates topped 18 percent.