Inman News
31 October 2013
Amid data that has lowered expectations for the performance of the housing market in the fourth quarter of this year, mortgage rates dropped for the second straight week.
Rates on 30-year fixed-rate mortgages averaged 4.1 percent with an average point of 0.7 for the week ending Oct. 31, down from 4.13 percent last week but up from 3.39 percent a year ago, according to Freddie Mac’s latest Primary Mortgage Market Survey.
Rates on 15-year fixed-rate mortgages and five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans also decreased, while rates on one-year Treasury-indexed ARMs increased.
“Fixed mortgage rates eased further leading up to the Federal Reserve’s (Fed) Oct. 30 monetary policy announcement (see below),” said Frank Nothaft, vice president and chief economist at Freddie Mac. “The Fed saw improvement in economic activity and labor market conditions since it began its asset purchase program, but noted the recovery in the housing market slowed somewhat in recent months and unemployment remains elevated.”
“As a result, there was no policy change which should help sustain low mortgage rates in the near future.”
Fed officials say they want more evidence that recent improvement in economic activity and labor market conditions is sustainable before tapering its monthly purchases of $40 billion in mortgage-backed securities and $45 billion in long-term Treasuries.
The Fed’s “quantitative easing” helps keep borrowing costs low, but the Fed has been looking for an opportunity to scale back its purchases to avoid creating conditions that could lead to inflation.
The Mortgage Bankers Association is forecasting that the Fed won’t begin “tapering” until early next year, and expects the program will be wound down by September 2014. The trade group anticipates that tapering and other forces will push mortgage rates above 5 percent in 2014 and to 5.3 percent by the end of 2015.
Source: federalreserve.gov