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Mortgage rates, like Congress, just sit there

Polyana da Costa

Mortgage rates ticked up this week as many investors remained bullish on the economy. Rising rates are not great news for homeowners who are waiting for Congress to pass a law to make it easier to refinance mortgages. But there's still hope that low rates will be around a little longer, analysts say.

30 year fixed rate mortgage – 3 month trend

30 year fixed rate mortgage – 3 month trend

The benchmark 30-year fixed-rate mortgage rose to 3.79 percent from 3.76 percent, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.34 discount and origination points. One year ago, the mortgage index stood at 4.1 percent; four weeks ago, it was 3.6 percent.

The benchmark 15-year fixed-rate mortgage rose to 3.02 percent from 3 percent. The benchmark 5/1 adjustable-rate mortgage fell to 2.75 percent from 2.76 percent.

Weekly national mortgage survey

Results of Bankrate.com's Feb. 13, 2013, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

30-year fixed 15-year fixed 5-year ARM
This week's rate: 3.79% 3.02% 2.75%
Change from last week: +0.03 +0.02 -0.01
Monthly payment: $767.89 $1,141.05 $673.60
Change from last week: +$2.81 +$1.59 -$0.87

The 30-year fixed rate jumped by about a quarter of percentage point since the beginning of the year, but it remains extremely low, says Jordan Roth, senior branch manager at GFI Mortgage Bankers in New York.

As Congress faces another deadline to deal with major budget issues by March 1, rates could actually drop slightly, rather than keep rising, he says.

"Markets do not like uncertainty," Roth says. "I think you could still see rates go back to December levels."

Massive spending cuts will kick in March 1 if Congress doesn't reach an agreement to avert the cuts, known as budget sequestration. The sequester was enacted as part of debt ceiling negotiations that took place in 2011. It will implement automatic spending cuts across the board to save the government $1.2 trillion over 10 years.

Bob Walters, chief economist at Quicken Loans, agrees the battle over spending cuts could benefit rates in coming weeks.

"Uncertainty in Washington (D.C.) tends to bode well for mortgage rates," Walters says. That's because despite the United States' budget problems, U.S. Treasury and mortgage bonds are perceived as the safest investment around when investors get anxious about the economy, he says.

As long as the Federal Reserve is committed to purchasing billions of dollars in bonds every month to keep rates low, it's unlikely that rates will spike, he says.

Does that mean borrowers can count on low rates being here for when they want or need it? No, he says.

"People who can benefit from refinancing are literally crazy if they don't take advantage of it now," he says. "The risks-rewards are so tilted toward action that it makes absolutely no sense to sit on the sidelines."

Will Congress approve a new refinance plan?

For many homeowners, refinancing is not a matter of choice.

Even with rates at record lows, many homeowners who want to refinance their mortgages are being told no, President Barack Obama said during the State of the Union address Tuesday.

"Right now, there's a bill in this Congress that would give every responsible homeowner in America the chance to save $3,000 a year by refinancing at today's rates," he said.

The bill Obama was referring to isn't anything new, but it could help many homeowners if Congress acts this time. The bill would expand and streamline the Home Affordable Refinance Program, or HARP, to allow more homeowners to refinance their loans, even if they are not underwater.

Similar bills were introduced last year but they stalled.

Last week, Democratic senators Barbara Boxer of California and Robert Menendez of New Jersey reintroduced a bill that would reduce the costs and documentation and streamline other requirements needed to refinance loans owned by Fannie Mae and Freddie Mac.

Obama has urged Congress to pass the bill, but what happens next is anyone's guess.

"Democrats and Republicans have supported it before. So what are we waiting for? Take a vote and send me that bill," he said.

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