Mortgage applications plunge to 13-year low after Fed briefing

U.S. home mortgage applications fell for the second consecutive week to a 13-year low, following a jump in mortgage rates after last week’s announcement from the Federal Reserve that it would taper its bond market purchases starting in January.

Application activity dropped 6.3 percent to the lowest level seen since December 2000, according to data from the Mortgage Bankers Association. The rate on 30-year fixed-rate mortgages was 4.64 percent last week, up 0.2 points from the previous week but still lower than the 4.80 percent seen in September.

“Following the Federal Reserve’s taper announcement, mortgage application volume dropped again last week, with rates increasing and refinance application volume falling to its lowest level since November 2008,” Mike Fratantoni, the association’s vice president of research and economics, said in a statement, first cited by Reuters.

The Fed’s taper will result in a $10 billion monthly reduction of bond purchases to $75 billion, according to Reuters, with the cutback affecting purchases of U.S. Treasuries and mortgage-backed securities evenly. [Reuters] – Hiten Samtani