By Pete Carey - San Jose Mercury News

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A strengthening economy has pushed mortgage rates higher than 5 percent for the first time since May, and experts said they'll likely stay in that range for the rest of this year.

 

The good news: While the extraordinary low rates of the past year are unlikely to return, the recent increase is unlikely to dampen the fragile housing market.

 

"These are still fantastic interest rates," said Cathy Warshawsky of Bay Area Loans, who is also treasurer of the Silicon Valley chapter of the California Association of Mortgage Professionals.

 

But, those in the real estate industry say that what's really vital to get the housing market going again is economic growth and, more important, jobs.

 

"What we need is a balance between attractive rates and the ability and willingness of prospective homebuyers to take the plunge," said Greg McBride, a financial analyst with Bankrate.com. "We're getting closer."

 

"Mortgage rates were at record lows in the fourth quarter of last year," McBride noted, "but not enough people could take advantage. "

 

Joe Adamson of Mortgage Magic in San Jose said rising rates "might weaken demand a bit," but he thinks rates will stay between 5 percent and 5.5 percent for at least the next six months.

 

The increase doesn't have borrowers leaping off the fence to buy a home before rates go higher, according to valley mortgage brokers.

 

And for those who are, there are still a lot of obstacles as lenders toughened standards after the collapse of the housing market.

 

After spending four years to find her dream home, Rebecca McConnell, a San Jose area school administrative assistant, and her partner, Gregory Thomson, locked in a 5 percent rate Thursday on the purchase of their first home, a four-bedroom ranch house in Almaden Valley. She said she would have bought the home even if rates had been higher.

 

"We wished it could have been a little better, but that's the best you can get. And we're going to live in it for the rest of our lives," McConnell said.

 

The couple made a 20 percent down payment and patiently worked through the lender's vetting process.

 

"It seems like there was a lot of verification," McConnell said. "They really want to make sure we were real people and we were who we said we were." At one point, the bank asked for her phone bill. "There were a lot of strange requests," she said.

 

More than three in four recent homebuyers surveyed by MortgageMatch.com reported that getting a mortgage was more difficult than they expected. Nine percent reported being asked for inappropriate information, rising to 11.7 percent of female borrowers, according to the survey, which was released this week.

 

Twenty percent said waiting to hear whether their mortgage was approved was more stressful than waiting to hear if they got a job, according to MortgageMatch, which is part of the Move online real estate network.

 

Mortgage giant Freddie Mac reported Thursday that interest rates on a 30-year fixed mortgage have jumped to 5.02 percent in the western region of the country after remaining in the 4 percent range for more than nine months.

 

A variety of factors combined to push mortgage rates up this week, said Frank Nothaft, chief economist at Freddie. Positive economic reports, a drop in the unemployment rate and a year of high business productivity each provided a nudge.

The increase in rates has affected another part of the market: Refinancing has already slowed. Many California homeowners are underwater on their mortgages and can't qualify for a refinance, said Dustin Hobbs of the California Mortgage Bankers Association. And after a couple of years of really good rates and terms, there aren't that many qualified borrowers who haven't already refinanced, he said.