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30-year mortgage rates rise to 5.05 percent

The interest rates for 30-year fixed mortgages rose to 5.05 percent Thursday, the highest since April, as the economy continues to improve.

The interest rates for 30-year fixed mortgages rose to 5.05 percent Thursday, the highest since April, as the economy continues to improve.

"Bond yields jumped on positive economic data reports, pushing up rates," said Freddie Mac chief economist Frank Nothaft.

The 30-year rate fell below 5 percent late last spring and continued to spiral downward until reaching 4.17 percent in mid-November.

Higher interest rates are a concern to homeowners hoping to refinance and to prospective homebuyers who might be shut out.

Some real estate agents suggest, however, that rising rates create a sense of urgency and can get folks off the fence and into homes.

"Showings on listings are increasing," said Diane Williams of Weichert Realtors, in Blue Bell. "I have four settlements this month and more listing appointments."

Sellers are ready to move forward because of pent-up demand, she said.

About a year ago, real estate agents and builders were talking about a sweet spot in mortgage rates, 4.5 percent, that would start the home-buying ball rolling again.

It didn't.

"Buyers weren't buying because prices were still falling, mortgage applications were still being denied, and the economy was still contracting," said Econsult vice president Kevin Gillen. "Now, we're near the bottom of price declines, credit is being loosened up, unemployment is down from its peak, and the economy has resumed growing."

It is more likely that the perception of an improving economy, not rising interest rates, is motivating buyers.

The National Association of Realtors reported Thursday that home sales rebounded in 49 states in the fourth quarter of 2010, and that prices rose in many metro markets.

In the Philadelphia region, including Wilmington, median prices climbed 1.4 percent year over year, to $231,000 from $215,500. Sales were up 11.5 percent from the third quarter in Pennsylvania and 9.7 percent in New Jersey, but still down 33.4 percent and 27.1 percent, respectively, from the same period in 2010.

The Mortgage Bankers Association reported Wednesday that interest rates increased last week as many economic indicators continued to show stronger-than-anticipated growth.

"Refinance volume continues to be low, as fewer homeowners with equity have any incentive to refinance," said Michael Fratantoni, vice president of research and economics for the group. "Purchase volume remains weak on a seasonally adjusted basis."

In general, lower interest rates did not translate into actual home purchases, industry observers said.

"As an economist, everything I've been taught tells me that when the price of something goes up, demand for it should go down," said Gillen. "So, if the price of credit - interest rates - goes up, I'd be curious to see what type of economic model says that demand for credit should also go up.

"But hey, if Realtors want to tell themselves that, then that is their right," he said.