Mortgage Rates Rise

June 11 (Bloomberg) -- Fixed U.S. mortgage rates rose to the highest since November, signaling that the Federal Reserve’s plan to lower borrowing cost is stalling.

The average 30-year rate jumped to 5.59 percent from 5.29 percent a week earlier, Freddie Mac, the McLean, Virginia-based mortgage buyer, said today in a statement. The 15-year rate averaged 5.06 percent.

Rising rates may deepen the U.S. housing slump by sidelining people who want to refinance or purchase a house. U.S. mortgage applications fell last week to the lowest since February and shares of the largest homebuilders have dropped 11 percent since May 1 on concern more expensive home loan payments will turn away prospective buyers.

“The economy doesn’t need higher mortgage rates because that will depress the level of home sales, cut off refinancing, and keep consumer spending sluggish,” said Patrick Newport, an economist with Lexington, Massachusetts-based IHS Global Insight.

The increase in rates announced today was the biggest weekly jump since October. Rates were last higher in the week ended Nov. 27, when they were 5.97 percent.

The Federal Reserve said March 18 it would purchase as much as $1.25 trillion in securities from mortgage-buyers Fannie Mae and Freddie Mac to help drive borrowing costs lower. Yields on Fannie Mae and Freddie Mac mortgage securities rose yesterday to a level not seen since the Fed announced its plan. The program helped push rates to a record low 4.78 percent twice in April.

Now rates are climbing along with Treasury yields on investor concern that a greater supply of government debt being sold to fund federal spending will fuel inflation.

Buying Program

The central bank’s purchases of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae initially brought down the yields on those securities, allowing lenders to reduce rates on new loans and still sell them at a profit.

The Fed has bought a net $507.1 billion of mortgage bonds so far, including $25.5 billion in the week ended May 27, according to Bloomberg data.

Rates are rising as home prices continue to drop and foreclosures rise. U.S. foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million by the first half of the year, RealtyTrac Inc. said today.

A total of 321,480 properties received a default or auction notice or were repossessed last month, up 18 percent from a year earlier, the Irvine, California-based seller of default data said in a statement. One in 398 U.S. households received a filing last month.

Home prices in 20 major metropolitan areas fell more than forecast in March as defaults surged. The S&P/Case-Shiller home- price index decreased 18.7 percent from March 2008, matching the drop in the year ended in February. The measure declined 19 percent in January, the most since data began in 2001.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan dropped 7.2 percent to 611 in the week ended June 5. Purchase applications rose 1.1 percent while requests to refinance fell 12 percent.

10 Tips for a better Savings Account

1. Know where to investigate. Go to Bankrate.com and click on “Compare rates.” Select “Checking & Savings” as the product you want to check, then click on “MMAs/Savings Accounts,” then “Search by 100 Highest Yields.” Keep choosing MMAs and savings accounts as you click through, and you’ll arrive at a list of banks offering above-average yields.

2. Check the safety rating. Some banks offer unusually high yields because they’re trying to drum up business and increase deposits. To make sure you’re dealing with a financial institution that isn’t too shaky, check the “Safe & Sound” rating it’s been given by Bankrate.com.(You’ll also see “Safe & Sound” ratings in the form of a star system in the overall bank list mentioned in Tip No. 1. One star is the lowest rating; five stars means “superior.”)

3. Look for government-backed insurance. Opt for an institution that is insured by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Share Insurance Fund (NCUSIF). That means up to $100,000 of the money you deposit will be insured by the federal government.

4. Understand how it works. Online banks and bank divisions save millions on operating expenses because they don’t have branches to maintain. They are able to pass that savings on to customers in the form of higher yields on deposits.

5. Don’t be duped. Online divisions of well-known banks should be federally insured, but it’s still a good idea to check. Some sneaky copycat sites look and feel similar to the sites of real banks, so examine the bank’s name carefully and make sure it’s legitimate, with headquarters based at a real, verifiable address.

6. Prepare to link up to your checking account. If you open an online savings or money market account, you won’t need to cancel or close your existing accounts at your current bank. In fact, the online entity most likely will want to link your new account to your existing checking account so you can transfer money back and forth with ease.

7. Don’t get too hung up on precise rates – unless they won’t last. You could spend a lot of time and energy hunting down an interest rate that is, say, 0.03 percent higher than another rate, but that won’t make a huge difference in your overall yield. Just try to get a big enough rate bump that you’re losing less money to inflation every year. Here’s one rate-related detail that really does matter, though: Make sure you’re not being seduced by a high teaser rate that will plummet in three months or so. The idea is to keep the higher yields rolling in month after month.

8. Examine the fees. Some online accounts require high minimum balances to avoid monthly fees. Be certain you’ll be able to deposit enough money – and keep enough money in your account – to avoid getting walloped. Also check to see whether you’ll be hit with fees when you make deposits at a brick-and-mortar bank branch or use an ATM card to withdraw cash.

9. Choose challenging passwords. When selecting passwords for your online accounts, avoid obvious ones such as your mother’s maiden name, your date of birth, the last four digits of your Social Security number or a series of consecutive numbers. Opt for a hard-to-guess combination of letters and numbers.

10. Be a savvy computer user. Update your virus protection software regularly, don’t download files or click on hyperlinks sent to you by people you don’t know, use a firewall program and use a secure browser for online transactions. Also, avoid storing financial information on your laptop. (Laptops are much too easy to steal.)

GM Says Bankruptcy want affect the Volt

As General Motors finally caved this morning, waved the white flag and filed for bankruptcy, those following electric cars immediately wondered what this all would mean for the long-awaited Volt. For years now, GM has steadfastly affirmed that it was moving forward with production regardless of what else was going on within the company and the economy at large. According to Technology Review, a GM spokesperson confirmed again this morning that 'the filing will have no impact on the company's plans to start selling the Volt at the end of next year.' That said, we have to wonder how much such a statement really means; reports have stated that the US government may up holding as much as 60 percent of the company, and if the primary goal is to bring the outfit back to profitability as soon as possible, Obama and Company may not feel that pouring even more into the high-priced Volt is a good idea.