Freddie Mac reported a huge jump in mortgage rates this week. The 30-year fixed mortgage rate averaged 6.63%, up 37 basis points from last week's 6.26% average. This is the highest mortgage rates have been since August 2, 2007 when it was at 6.68%.

In the other rate categories, 15-year fixed rates surged 40 basis points to 6.18%, five-year hybrid ARMs increased 36 basis points to 6.16%, and one-year ARMs jumped 39 basis points to 5.49%.

"Market concerns about rising inflation, further weakness in the housing market and greater probability that the Federal Reserve will raise short-term rates this year all combined to push mortgage rates higher this week," said Freddie Mac Chief Economist Frank Nothaft said. "Some of the key drivers to these concerns were consumer prices jumping 1.1 percent (annualized) in June — the largest increase since September 2005 on a year-over-year basis — coupled with consumer prices growing at a 5% clip (on a year-over-year basis), the strongest since February 1991."

The jump in mortgage rates is likely to have had a negative impact on mortgage application activity this week.  Yesterday, the Mortgage Bankers Association reported a 5.6% decline in the Refinance Index to 1393 for the week ending July 18.

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