Mortgage rate rise spurs housing worries

NEW YORK, July 23 (UPI) -- Rising home mortgage rates may add another burden to the faltering U.S. housing market, analysts say.

The average interest rate for 30-year fixed-rate mortgages rose from 6.44 percent to 6.71 percent Tuesday, spurred by doubts about the futures of giant quasi-public home loan financiers Fannie Mae and Freddie Mac, The New York Times reported.

The two companies own or guarantee $5.2 trillion in home mortgages, nearly half of the nation's total outstanding home loans, and the U.S. Congress is debating a rescue package to bail them out of a capital crunch brought on by falling home prices.

But doubts that Fannie and Freddie will play as big a role in the mortgage market going forward made bond investors drive up interest rates on securities backed by home loans, and those costs are being passed on to consumers, the newspaper said.

Borrowers holding a $400,000 adjustable-rate, interest-only loan would see monthly payments on their interest and principle jump to $2,338 from $1,417. Boulder, Colo., mortgage broker Louis Barnes told the Times, saying, "When we get to rate levels like this, the market just shuts down."