NEW YORK - U.S. mortgage rates rose for the first time in three weeks, leaping above 5 percent, a key level that could suppress demand for home loans, a closely watched mortgage survey showed on Thursday.

Mortgage rates are widely seen to be on an upward trajectory this year as Federal Reserve asset purchase programs cease and the economy recovers.

Rising mortgage rates do not bode well for the housing market, which remains highly vulnerable to setbacks and heavily reliant on government intervention.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 5.05 percent for the week ended February 25, up from the previous week's 4.93 percent, according to a survey released by Freddie Mac (FRE.P) (FRE.N), the second-largest U.S. mortgage finance company.

That is slightly below the year-ago level of 5.07 percent, but above the record low of 4.71 percent in early December. Freddie Mac started the survey in 1971.

Interest rates for 30-year fixed mortgages followed long-term bond yields higher and rose above 5 percent this week amid a mixed set of economic data reports Freddie Mac vice president and chief economist Frank Nothaft said in a statement.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.

The lowest mortgage rates in decades and high affordability helped the hard-hit housing market find some footing last year after a three-year slump. Mortgage rates are expected to rise when the Fed -- the U.S. central bank -- stops buying mortgage-related securities at the end of March.

The U.S. Commerce Department said on Wednesday sales of newly built single-family homes fell to a record low in January. On Friday, the National Association of Realtors releases January existing U.S. home sales data.


The Mortgage Bankers Association said on Wednesday U.S. mortgage applications fell for a third straight week, with demand for home purchase loans sinking to the lowest level in 13 years.

We're seeing a short-term lift, but financing activity remains generally weak due to lackluster housing demand and reduced borrower equity, said Chris George, CEO of CMG Mortgage. based in San Ramon, California.

George, who is also the secretary of the California Mortgage Bankers Association, said they are seeing great interest in their Home Ownership Accelerator loan, which allows borrowers to build equity at about double the normal rate, even in a flat housing market.

Freddie Mac said the 15-year fixed-rate mortgage averaged 4.40 percent in the latest week, up from 4.33 percent the prior week.

Interest rates on other types of loans were mixed.

One-year adjustable-rate mortgages (ARMs) were 4.15 percent in the latest week, down from 4.23 percent the prior week. The rate on the 5/1 ARM, set at a fixed rate for five years and adjustable each following year, was 4.16 percent, compared with 4.12 percent a week earlier.

A year ago, 15-year mortgages averaged 4.68 percent, the one-year ARM 4.81 percent and the 5/1 ARM 5.06 percent.

(Additional reporting by Lucia Mutikani in Washington; Editing by James Dalgleish)