Unexpectedly low rates defy Fed taper expectations

Homebuyers get break as 30-year fixed mortgage rate hits nearly three-month low

New York /
Feb.February 12, 2014 06:04 PM

A drop in interest rates in the last month defied forecaster expectations and gave homebuyers a bit of unexpected relief as the Federal Reserve announced plans to begin tapering its purchases of mortgage-backed securities.

The average 30-year fixed rate mortgage in the U.S. fell to a rate of 4.23 percent last week, hitting nearly hitting a three-month low and a 0.3 percentage point lower than at the start of 2014 — a tumble in the cost of borrowing that will enable homebuyers to make purchases sooner than planned.

“People are getting a second chance, and that is bound to give a boost to the housing market,” Sam Khater, deputy chief economist at mortgage data firm CoreLogic told Bloomberg News. “It’s not a game changer unless emerging markets situation worsens and rates get even cheaper.”

Fannie Mae, Freddie Mac, the Mortgage Bankers Association and the National Association of Retailers all predicted that January rates would jump by at least 0.3 percentage points in the first quarter, but yields on 10-year treasuries shrank as investors drove up bond prices. [Bloomberg News]Julie Strickland


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