Freddie Mac's Weekly Primary Mortgage Market Survey reported that mortgage rates took a real leap during the week ended June 22. Average rates for 30-year fixed mortgages originated during this period were 6.71 percent with fees and points averaging 0.5 compared to 6.63 and 0.5 for the previous week. This was the highest level the 30-year had attained since May 31, 2002.

The 15-year fixed rate mortgage jumped 11 basis points to 6.38 percent although fees and points were down 0.1 to 0.5, the highest for this product since May 17, 2002. The two ARMs were each up nine basis points with the 5/1-year ARM averaging 6.32 percent and the 1-year ARM 5.75 percent. Fees and points were up as well, from 0.5 to 0.6 for the 5/1 and 0.8 from 0.6 for the 1-year. This was the highest rate for the 5/1 since Freddie Mac started tracking it at the beginning of 2005 and the 1-year last saw this level the week ended August 3, 2001.

Frank Nothaft, Freddie Mac vice President and chief economist again blamed inflation jitters for the increases. The Federal Reserve, due to meet this afternoon (June 28), is widely expected to raise rates another quarter point and Nothaft said that what was believed to be a vaguely possible hike in August is now viewed as being highly likely. He said that these changes in market expectations caused mortgage rates to surge this week.

The Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ended June 23 revealed even bigger increases. The 30-year fixed rate mortgage was up 13 basis points to 6.86 percent with points, including the origination fee, decreasing from 1.14 to 1.10. This is the highest level 30-year rates have reached in the MBA survey since April 2002.

Average rates for 15-year fixed rate mortgages jumped from 6.37 to 6.49 percent, also the highest since April four years ago. Points dropped from 1.10 to 1.04.

New 1-year ARMs averaged 6.36 percent from 6.22 percent the previous week. Points were up fractionally - from 0.86 to 0.87. The ARM has not registered so high on the MBA survey since February 2001.

Not surprisingly, mortgage application volume was down 6.7 percent on a seasonally adjusted basis and 7.0 percent unadjusted from one week ago. Building on a pattern of diminishing activity established several months ago, applications were down 31 percent from the same week in 2005.

Refinancing as a share of total mortgage applications decreased to 35.3 percent from 35.5 percent and the popularity of the 1-year ARM declined from 29.6 percent the week of June 15 to 29.1 percent last week.