Rising inflation fears led to an increase in mortgage rates across the board according to Freddie Mac's Weekly Primary Mortgage Market Survey for the week ended June 1. At the same time the survey conducted by the Mortgage Bankers Association had a more mixed outcome.

Freddie Mac's survey placed the average rate for 30-year fixed rate mortgages at 6.67 percent, up five basis points from the previous week; fees and points were unchanged at 0.4. This is the highest level for the 30-year since the week ended June 13, 2002 when it averaged 6.71 percent. The 15-year fixed rate loan also hit a recent record level, the highest since May 24, 2003, averaging 6.26 percent with fees and points unchanged at 0.4.

The 5/1-year adjustable rate mortgage increased from 6.21 percent to 6.26 percent while fees and points dropped from 0.6 to 0.5. Freddie Mac has only tracked this product since January 2005 but this is probably also a new high.

The one-year Treasury-indexed ARM hit its highest level since the week ended August 17, 2001 when it averaged 5.71 percent. The latest rate was 5.68 percent, up from 5.61 percent. Fees and points were unchanged at 0.7.

Frank Nothaft, Freddie Mac vice president and chief economist commented that the most recent minutes of the Federal Open Market Committee (FOMC) showed that some members of the committee were concerned about inflationary pressure. "This caused the bond market yields to rise, and brought about market speculation that the Fed may hike rates sooner than had been expected. All this combined to nudge rates up again this week."

Nothaft said that he expected higher mortgage rates to coincide with a cooling housing market. "Although our forecast is for slightly higher rates, the rise will be gradual and orderly over the year."

The North Central Region again had the highest rates; 6.72 percent for 30-year and 6.30 for 15-year and the Southeast the lowest, 6.60 and 6.21 respectively The Northeast caught a break with ARMs; the 5/1 averaged 6.15 percent and the 1-year 5.27 percent. The North Central was at 6.41 and 5.91 percent.

The Weekly Mortgage Applications Survey conducted by the Mortgage Bankers Association for the week ended June 2 reported that two of the three products it covers moved in the opposite direction from Freddie's survey. The 30-year fixed rate mortgage decreased to 6.60 percent from 6.66 percent although points, including the origination fee, jumped from 1.03 to 1.19. 15-year mortgages did increase, but only one basis point to 6.23 percent while points inched down from 1.18 to 1.16.

The average contract rate for the 1-year arm decreased four basis points to 6.05 percent and points increasing to 0.86 from 0.86.

All rates quoted from both sources are for 80 percent loan to value conventional products.

The mortgage application volume was down again, a mere 1.4 percent on a seasonally adjusted basis from a week earlier but 11.7 percent on an unadjusted basis. The volume was off 28.0 percent from the same week in 2005.

Refinancing as a share of all mortgage applications decreased to 34.2 percent from 34.9 percent and the ARM share of applications dropped from 30.7 to 29.4 percent.